G.R. No.
188417 September 24, 2012 On January 15, 1999, respondent Dolores Laxamana-Tabu, together with Julieta
MILAGROS DE BELEN VDA. DE CABALU, MELITON CABALU, SPS. ANGELA
CABALU and RODOLFO TALAVERA, and PATRICIO ABUS, Petitioners,
vs.
SPS. RENATO DOLORES TABU and LAXAMANA, Municipal Trial Court in
Cities, Tarlac City, Branch II,Respondents.
DECISION
MENDOZA, J.:
This is a "Petition for Review on Certiorari (under Rule 45)" of the Rules of Court
assailing the June 16, 2009 Decision1 of the Court of Appeals (CA) in CA-GR. CV No.
81469 entitled "Milagros De Belen Vda de Cabalu v. Renato Tabu."
The Facts
The property subject of the controversy is a 9,000 square meter lot situated in
Mariwalo, Tarlac, which was a portion of a property registered in the name of the late
Faustina Maslum (Faustina) under Transfer Certificate of Title (TCT) No. 16776 with a
total area of 140,211 square meters.2
On December 8, 1941, Faustina died without any children. She left a holographic will,
dated July 27, 1939, assigning and distributing her property to her nephews and
nieces. The said holographic will, however, was not probated. One of the heirs was
the father of Domingo Laxamana (Domingo), Benjamin Laxamana, who died in 1960.
On March 5, 1975, Domingo allegedly executed a Deed of Sale of Undivided Parcel
of Land disposing of his 9,000 square meter share of the land to Laureano Cabalu.3
On August 1, 1994, to give effect to the holographic will, the forced and legitimate
heirs of Faustina executed a Deed of Extra-Judicial Succession with Partition. The
said deed imparted 9,000 square meters of the land covered by TCT No. 16776 to
Domingo. Thereafter, on December 14, 1995, Domingo sold 4,500 square meters of
the 9,000 square meters to his nephew, Eleazar Tabamo. The document was
captioned Deed of Sale of a Portion of Land. On May 7, 1996, the remaining 4,500
square meters of Domingo’s share in the partition was registered under his name
under TCT No. 281353.4
On August 4, 1996, Domingo passed away.
On October 8, 1996, two months after his death, Domingo purportedly executed a
Deed of Absolute Sale of TCT No. 281353 in favor of respondent Renato Tabu
(Tabu). The resultant transfer of title was registered as TCT No. 286484.
Subsequently, Tabu and his wife, Dolores Laxamana (respondent spouses),
subdivided the said lot into two which resulted into TCT Nos. 291338 and 291339. 5
Tubilan-Laxamana, Teresita Laxamana, Erlita Laxamana, and Gretel Laxamana, the
heirs of Domingo, filed an unlawful detainer action, docketed as Civil Case No. 7106,
against Meliton Cabalu, Patricio Abus, Roger Talavera, Jesus Villar, Marcos Perez,
Arthur Dizon, and all persons claiming rights under them. The heirs claimed that the
defendants were merely allowed to occupy the subject lot by their late father,
Domingo, but, when asked to vacate the property, they refused to do so. The case
was ruled in favor of Domingo’s heirs and a writ of execution was subsequently
issued.6
On February 4, 2002, petitioners Milagros de Belen Vda. De Cabalu, Meliton Cabalu,
Spouses Angela Cabalu and Rodolfo Talavera, and Patricio Abus (petitioners), filed a
case for Declaration of Nullity of Deed of Absolute Sale, Joint Affidavit of Nullity of
Transfer Certificate of Title Nos. 291338 and 291339, Quieting of Title,
Reconveyance, Application for Restraining Order, Injunction and Damages (Civil
Case No. 9290) against respondent spouses before the Regional Trial Court, Branch
63, Tarlac City (RTC).7
In their complaint, petitioners claimed that they were the lawful owners of the subject
property because it was sold to their father, Laureano Cabalu, by Domingo, through a
Deed of Absolute Sale, dated March 5, 1975. Hence, being the rightful owners by way
of succession, they could not be ejected from the subject property. 8
In their Answer, respondent spouses countered that the deed of sale from which the
petitioners anchored their right over the 9,000 square meter property was null and
void because in 1975, Domingo was not yet the owner of the property, as the same
was still registered in the name of Faustina. Domingo became the owner of the
property only on August 1, 1994, by virtue of the Deed of Extra-Judicial Succession
with Partition executed by the forced heirs of Faustina. In addition, they averred that
Domingo was of unsound mind having been confined in a mental institution for a
time.9
On September 30, 2003, the RTC dismissed the complaint as it found the Deed of
Absolute Sale, dated March 5, 1975, null and void for lack of capacity to sell on the
part of Domingo. Likewise, the Deed of Absolute Sale, dated October 8, 1996,
covering the remaining 4,500 square meters of the subject property was declared
ineffective having been executed by Domingo two months after his death on August
4, 1996. The fallo of the Decision10 reads:
WHEREFORE, in view of the foregoing, the complaint is hereby DISMISSED, and the
decision is hereby rendered by way of:
1. declaring null and void the Deed of Absolute Sale dated March 5, 1975,
executed by Domingo Laxamana in favor of Laureano Cabalu;
2. declaring null and void the Deed of Absolute Sale dated October 8, 1996,
executed by Domingo Laxamana in favor of Renato Tabu, and that TCT
Nos. 293338 and 291339, both registered in the name of Renato Tabu,
married to Dolores Laxamana be cancelled;
 3. restoring to its former validity, TCT No. 16770 in the name of Faustina
Maslum subject to partition by her lawful heirs.
Costs de oficio.
SO ORDERED.11
Not in conformity, both parties appealed to the CA. Petitioners contended that the
RTC erred in declaring void the Deed of Absolute Sale, dated March 5, 1975. They
claimed that Domingo owned the property, when it was sold to Laureano Cabalu,
because he inherited it from his father, Benjamin, who was one of the heirs of
Faustina. Being a co-owner of the property left by Benjamin, Domingo could dispose
of the portion he owned, notwithstanding the will of Faustina not being probated.
Respondent spouses, on the other hand, asserted that the Deed of Sale, dated March
5, 1975, was spurious and simulated as the signature, PTR and the document
number of the Notary Public were different from the latter’s notarized documents.
They added that the deed was without consent, Domingo being of unsound mind at
the time of its execution. Further, they claimed that the RTC erred in canceling TCT
No. 266583 and insisted that the same should be restored to its validity because
Benjamin and Domingo were declared heirs of Faustina.
On June 16, 2009, the CA rendered its decision and disposed as follows:
WHEREFORE, in the light of the foregoing, the instant appeal is partially GRANTED
in that the decision of the trial court is AFFIRMED WITH MODIFICATION that sub-
paragraphs 2 & 3 of the disposition, which reads:
"2. declaring null and void the Deed of Absolute Sale dated October 8, 1996,
executed by Domingo Laxamana in favor of Renato Tabu, and that TCT Nos. 291338
and 291339, both registered in the name of Renato Tabu, married to Dolores
Laxamana be cancelled;
3. restoring to its former validity, TCT No. 16776 in the name of Faustina Maslum
subject to partition by her lawful heirs," are DELETED.
IT IS SO ORDERED.12
In finding Domingo as one of the heirs of Faustina, the CA explained as follows:
It appears from the records that Domingo was a son of Benjamin as apparent in his
Marriage Contract and Benjamin was a nephew of Faustina as stated in the
holographic will and deed of succession with partition. By representation, when
Benjamin died in 1960, Domingo took the place of his father in succession. In the
same vein, the holographic will of Faustina mentioned Benjamin as one of her heirs to
whom Faustina imparted 9,000 square meters of her property. Likewise, the
signatories to the Deed of Extra-judicial Succession with Partition, heirs of Faustina,
particularly declared Domingo as their co-heir in the succession and partition thereto.
Furthermore, the parties in this case admitted that the relationship was not an issue. 13
Although the CA found Domingo to be of sound mind at the time of the sale on March
5, 1975, it sustained the RTC’s declaration of nullity of the sale on the ground that the
deed of sale was simulated.
The CA further held that the RTC erred in canceling TCT No. 266583 in the name of
Domingo and in ordering the restoration of TCT No. 16770, registered in the name of
Faustina, to its former validity, Domingo being an undisputed heir of Faustina.
Hence, petitioners interpose the present petition before this Court anchored on the
following:
GROUNDS
(A)
THE DEED OF SALE OF UNDIVIDED PARCEL OF LAND EXECUTED ON
MARCH 5, 1975 BY DOMINGO LAXAMANA IN FAVOR OF LAUREANO
CABALU IS VALID BECAUSE IT SHOULD BE ACCORDED THE
PRESUMPTION OF REGULARITY AND DECLARED VALID FOR ALL
PURPOSES AND INTENTS.
(B)
THE SUBPARAGRAPH NO. 2 OF THE DECISION OF THE REGIONAL
TRIAL COURT SHOULD STAY BECAUSE THE HONORABLE COURT OF
APPEALS DID NOT DISCUSS THE ISSUE AND DID NOT STATE THE
LEGAL BASIS WHY SAID PARAGRAPH SHOULD BE DELETED FROM
THE SEPTEMBER 30, 2003 DECISION OF THE REGIONAL TRIAL
COURT.14
The core issues to be resolved are 1) whether the Deed of Sale of Undivided Parcel
of Land covering the 9,000 square meter property executed by Domingo in favor of
Laureano Cabalu on March 5, 1975, is valid; and 2) whether the Deed of Sale, dated
October 8, 1996, covering the 4,500 square meter portion of the 9,000 square meter
property, executed by Domingo in favor of Renato Tabu, is null and void.
Petitioners contend that the Deed of Absolute Sale executed by Domingo in favor of
Laureano Cabalu on March 5, 1975 should have been declared valid because it
enjoyed the presumption of regularity. According to them, the subject deed, being a
public document, had in its favor the presumption of regularity, and to contradict the
same, there must be clear, convincing and more than preponderant evidence,
otherwise, the document should be upheld. They insist that the sale transferred rights
of ownership in favor of the heirs of Laureano Cabalu.
They further argue that the CA, in modifying the decision of the RTC, should not have
deleted the portion declaring null and void the Deed of Absolute Sale, dated October
8, 1996, executed by Domingo in favor of Renato Tabu, because at the time of
execution of the said deed of sale, the seller, Domingo was already dead. Being a
void document, the titles originating from the said instrument were also void and
should be cancelled.
Respondent spouses, in their Comment15 and Memorandum,16 counter that the issues
raised are not questions of law and call for another calibration of the whole evidence
already passed upon by the RTC and the CA. Yet, they argue that petitioners’
reliance on the validity of the March 5, 1975 Deed of Sale of Undivided Parcel of
Land, based on presumption of regularity, was misplaced because both the RTC and
the CA, in the appreciation of evidence on record, had found said deed as simulated.
It is well to note that both the RTC and the CA found that the evidence established
that the March 5, 1975 Deed of Sale of Undivided Parcel of Land executed by
Domingo in favor of Laureano Cabalu was a fictitious and simulated document. As
expounded by the CA, viz:
Nevertheless, since there are discrepancies in the signature of the notary public, his
PTR and the document number on the lower-most portion of the document, as well as
the said deed of sale being found only after the plaintiffs-appellants were ejected by
the defendants-appellants; that they were allegedly not aware that the said property
was bought by their father, and that they never questioned the other half of the
property not occupied by them, it is apparent that the sale dated March 5, 1975 had
the earmarks of a simulated deed written all over it. The lower court did not err in
pronouncing that it be declared null and void.17
Petitioners, in support of their claim of validity of the said document of deed, again
invoke the legal presumption of regularity. To reiterate, the RTC and later the CA had
ruled that the sale, dated March 5, 1975, had the earmarks of a simulated deed,
hence, the presumption was already rebutted. Verily and as aptly noted by the
respondent spouses, such presumption of regularity cannot prevail over the facts
proven and already established in the records of this case.
Even on the assumption that the March 5, 1975 deed was not simulated, still the sale
cannot be deemed valid because, at that time, Domingo was not yet the owner of the
property. There is no dispute that the original and registered owner of the subject
property covered by TCT No. 16776, from which the subject 9,000 square meter lot
came from, was Faustina, who during her lifetime had executed a will, dated July 27,
1939. In the said will, the name of Benjamin, father of Domingo, appeared as one of
the heirs. Thus, and as correctly found by the RTC, even if Benjamin died sometime
in 1960, Domingo in 1975 could not yet validly dispose of the whole or even a portion
thereof for the reason that he was not the sole heir of Benjamin, as his mother only
died sometime in 1980.
Besides, under Article 1347 of the Civil Code, "No contract may be entered into upon
future inheritance except in cases expressly authorized by law." Paragraph 2 of
Article 1347, characterizes a contract entered into upon future inheritance as void.
The law applies when the following requisites concur: (1) the succession has not yet
been opened; (2) the object of the contract forms part of the inheritance; and (3) the
promissor has, with respect to the object, an expectancy of a right which is purely
hereditary in nature.18
In this case, at the time the deed was executed, Faustina’s will was not yet probated;
the object of the contract, the 9,000 square meter property, still formed part of the
inheritance of his father from the estate of Faustina; and Domingo had a mere
inchoate hereditary right therein.1âwphi1
Domingo became the owner of the said property only on August 1, 1994, the time of
execution of the Deed of Extrajudicial Succession with Partition by the heirs of
Faustina, when the 9,000 square meter lot was adjudicated to him.
The CA, therefore, did not err in declaring the March 5, 1975 Deed of Sale null and
void.
Domingo’s status as an heir of Faustina by right of representation being undisputed,
the RTC should have maintained the validity of TCT No. 266583 covering the 9,000
square meter subject property. As correctly concluded by the CA, this served as the
inheritance of Domingo from Faustina.
Regarding the deed of sale covering the remaining 4,500 square meters of the
subject property executed in favor of Renato Tabu, it is evidently null and void. The
document itself, the Deed of Absolute Sale, dated October 8, 1996, readily shows that
it was executed on August 4, 1996 more than two months after the death of Domingo.
Contracting parties must be juristic entities at the time of the consummation of the
contract. Stated otherwise, to form a valid and legal agreement it is necessary that
there be a party capable of contracting and a party capable of being contracted with.
Hence, if any one party to a supposed contract was already dead at the time of its
execution, such contract is undoubtedly simulated and false and, therefore, null and
void by reason of its having been made after the death of the party who appears as
one of the contracting parties therein. The death of a person terminates contractual
capacity.19
The contract being null and void, the sale to Renato Tabu produced no legal effects
and transmitted no rights whatsoever. Consequently, TCT No. 286484 issued to Tabu
by virtue of the October 8, 1996 Deed of Sale, as well as its derivative titles, TCT Nos.
291338 and 291339, both registered in the name of Rena to Tabu, married to Dolores
Laxamana, are likewise void.
The CA erred in deleting that portion in the RTC decision declaring the Deed of
Absolute Sale, dated October 8, 1996, null and void and canceling TCT Nos. 291338
and 291339.
WHEREFORE, the petition is partially GRANTED. The decretal portion of the June
16, 2009 Decision of the Court of Appeals is hereby MODIFIED to read as follows:
1. The Deed of Absolute Sale, dated March 5, 1975, executed by Domingo
Laxamana in favor of Laureano Cabalu, is hereby declared as null and void.
 2. The Deed of Absolute Sale, dated October 8, 1996, executed by Domingo
Laxamana in favor of Renato Tabu, and TCT No. 286484 as well as the
derivative titles TCT Nos. 291338 and 291339, both registered in the name
of Renato Tabu, married to Dolores Laxamana, are hereby declared null and
void and cancelled.
3. TCT No. 281353 in the name of Domingo Laxamana is hereby ordered
restored subject to the partition by his lawful heirs.
SO ORDERED.
G.R. No. 172919
TIMOTEO BACALSO and DIOSDADA BACALSO, Petitioners,
vs.
GREGORIA B. ACA-AC, EUTIQUIA B. AGUILA, JULIAN BACUS and EVELYN
SYCHANGCO, Respondents.
DECISION
REYES, J.:
Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of
Court seeking to annul and set aside the Decision2 dated December 14, 2005 and the
Resolution3 dated May 30, 2006 of the Court of Appeals (CA) in CA-G.R. CV No.
67516. The CA affirmed the Decision dated April 19, 2000 of the Regional Trial Court
(RTC) of Cebu City, Branch 11, in Civil Case No. CEB-17994. The RTC ruled that the
Deed of Absolute Sale elated October 15, 1987 between herein respondents Gregoria
B. Aca-Ac, Eutiguia B. Aguila and Julian Bacus (Julian) (Bacus siblings) and herein
petitioner Timoteo Bacalso (Timoteo) was void for want of consideration.
The Facts
The Bacus siblings were tbe registered owners of a parcel of land described as Lot
No. 1809-G-2 located in San Roque, Talisay, Cebu with an area of 1,200 square
meters and covered by Transfer Certificate of Title (TCT) No. 59260. The Bacus
siblings inherited the said property from their mother Matea Bacalso (Matea). 4
On October 15, 1987, the Bacus siblings executed a Deed of Absolute Sale
conveying a portion of Lot No. 1809-G-2 with an area of 271 sq m, described as Lot
No. 1809-G-2-C, in favor of their cousin, Timoteo for and in consideration of the
amount of P8,000.00.5
On March 4, 1988, however, Timoteo, together with his sisters Lucena and Victoria
and some of his cousins filed a complaint for declaration of nullity of documents,
certificates of title, reconveyance of real property and damages against the Bacus
siblings and four other persons before the RTC of Cebu City, Branch 12, and was
docketed as Civil Case No. CEB-6693. They claimed that they are co-owners of the
three-fourths portion of Lot No. 1809-G (which Lot No. 1809-G-2-C was originally part
of) as Matea had paid for the said property for and in behalf of her brother Alejandro
(father of petitioner Timoteo) and sisters Perpetua and Liberata, all surnamed
Bacalso.6
On November 29, 1989, the RTC found that Matea was the sole owner of Lot No.
1809-G and affirmed the validity of the conveyances of portions of Lot No. 1809-G
made by her children. The same was aflirmed by the CA in a Decision dated March
23, 1992 and became final and executory on April 15, 1992.7
Undaunted, Timoteo and Diosdada Bacalso (petitioners) filed on October 26, 1995, a
complaint for declaration of nullity of contract and certificates of title, reconveyance
and damages against the Bacus siblings, this time claiming ownership over Lot No.
1809-G-2-C by virtue of the Deed of Absolute Sale dated October 15, 1987. They
claimed, however, that the Bacus siblings reneged on their promise to cause the
issuance of a new TCT in the name of the petitioners. 8
Moreover, the petitioners alleged that the Bacus siblings have caused the subdivision
of Lot No. 1809-G-2 into four lots and one of which is Lot No. 1809-G-2-C which is
now covered by TCT No. 70783. After subdividing the property, the Bacus siblings, on
February 11, 1992, without knowledge of the petitioners, sold Lot No. 1809-G-2-C
again to respondent Evelyn Sychangco (Sychangco) and that TCT No. 74687
covering the same property was issued in her name.9
In their answer, the Bacus siblings denied the allegations of the petitioners and
claimed that the alleged sale of Lot No. 1809-G-2-C in favor of the petitioners did not
push through because the petitioners failed to pay the purchase price thereof. 10
For her part, Sychangco averred that she is a buyer in good faith and for value as she
relied on what appeared in the certificate of title of the property which appeared to be
a clean title as no lien or encumbrance was annotated therein. 11
On April 19, 2000, the RTC issued a Decision declaring the Deed of Absolute Sale
dated October 15, 1987 void for want of consideration after finding that the petitioners
failed to pay the price of the subject property. Moreover, the RTC held that even
granting that the sale between the Bacus siblings and the petitioners was valid, the
petitioners still cannot ask for the rescission of the sale of the disputed portion to
Sychangco as the latter was a buyer in good faith, thus has a better right to the
property. 12
Aggrieved by the foregoing disquisition of the RTC, the petitioners interposed an
appeal with the CA. On December 14, 2005, however, the CA affirmed the ruling of
the RTC. The petitioners sought a reconsideration 13 of the CA decision but it was
denied in a Resolution dated May 30, 2006.
The Issues
The petitioners assign the following errors of the CA:
 I.
THE [CA] SERIOUSLY ERRED WHEN IT RELIED TOO MUCH ON THE
RESPECTIVE ORAL TESTIMONIES OF RESPONDENTS JULIAN BACUS AND
EVELYN SYCHANGCO UTTERLY DISREGARDING THE ORAL TESTIMONIES OF
PETITIONER TIMOTEO BACALSO AND THE LATTER'S WITNESS ROBERTO
YBAS AND THE DOCUMENTARY EVIDENCE OF THE PETITIONERS, THE DULY
EXECUTED AND NOTARIZED DEED OF ABSOLUTE SALE COVERING THE
SUBJECT LOT NO. 1809-G-2-C.
II
THE [CA] SERIOUSLY ERRED WHEN IT RULED THAT THE DEED OF ABSOLUTE
SALE DATED 15 OCTOBER 1987 IS NULL AND VOID AB INITIO FOR FAILURE OR
WANT OF CONSIDERATION.
III
THE [CA] SERIOUSLY ERRED WHEN IT DID NOT CONSIDER TI-IE FACT THAT
THE DEED OF ABSOLUTE SALE DATED 15 OCTOBER 1987 WAS NOTARIZED,
HENCE, A PUBLIC DOCUMENT WHICH ENJOYS THE PRESUMPTION OF
REGULARITY.
IV
THE [CA] SERIOUSLY ERRED WHEN IT DID NOT RULE THAT ON 15 OCTOBER
1987, THE [BACUS SIBLINGS] WERE NO LONGER OWNERS AND POSSESSORS
OF Tl-IE SUBJECT LOT AS THE SAME WAS ALREADY TRANSFERRED TO TI-IE
PETITIONERS BY REASON OF THE MERE EXECUTION OF A DEED OF SALE IN
A PUBLIC DOCUMENT, AS IN THIS CASE.14
Essentially, the issues presented to the Court for resolution could be reduced into
whether the CA erred in holding that the Deed of Absolute Sale dated October 15,
1987 is void for want of consideration.
Ruling of the Court
The petition is bereft of merit.
The central issue to be resolved in the present controversy is the validity of the Deed
of Absolute Sale between the petitioners and the Bacus siblings. "Such issue involves
a question of fact and settled jurisprudence dictates that, subject to a few exceptions,
only questions of law may be brought before the Court via a petition for review
on certiorari."15
The Court has repeatedly held that it is not necessitated to examine, evaluate or
weigh the evidence considered in the lower courts all over again. "This is especially
true where the trial court's factual findings are adopted and affirmed by the CA as in
the present case. Factual findings of the trial court, afiirmed by the CA, are final and
conclusive and may not be reviewed on appeal." 16
Although the Court recognized several exceptions to the limitation of an appeal
by certiorari to only questions of law, including: (1) when the findings are grounded
entirely on speculation, surmises, or conjectures; (2) when the interference made is
manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of
discretion; (4) when the judgment is based on a misapprehension of facts; (5) when
the findings of fact are conflicting; (6) when in making its findings, the CA went
beyond the issues of the case, or its findings are contrary to the admissions of both
the appellant and the appellee; (7) when the findings are contrary to those of the trial
court; (8) when the findings are conclusions without citation of specific evidence on
which they are based; (9) when the facts set forth in the petition as well as in the
petitioner's main and reply briefs are not disputed by the respondent; and (10) when
the findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record,17 the present appeal does not come under
any of the exceptions.
In any event, the Court has carefully reviewed the records of the instant case and
found no reason to disturb the findings of the RTC as affirmed by the CA.
Under the Civil Code, a contract is a meeting of minds, with respect to the other, to
give something or to render some service. Article 1318 provides:
Art. 1318. There is no contract unless the following requisites concur:
(l) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
In the case at bar, the petitioners argue that the Deed of Absolute Sale has all the
requisites of a valid contract. The petitioners contend that there is no lack of
consideration that would prevent the existence of a valid contract. They assert that
the testimonies of Timoteo and witness Roberto Ybas sufficiently established that the
purchase price of P5,000.00 for Lot No. 1809-G-2-C was paid to Julian at Sto. Nifio
Church in Cebu City before the execution of the Deed of Absolute Sale. They also
claim that even assuming that they failed to pay the purchase price, such failure does
not render the sale void for being fictitious or simulated, rather, there is only non-
payment of the consideration within the period agreed upon for payment. 18
The Court does not agree.
Contrary to the petitioners' claim, this is not merely a case of failure to pay the
purchase price which can only amount to a breach of obligation with rescission as the
proper remedy. As correctly observed by the RTC, the disputed sale produces no
effect and is considered void ab initio for failure to or want of consideration since the
petitioner failed to pay the consideration stipulated in the Deed of Absolute Sale. The
trial court's discussion on the said issue, as affirmed by the CA, is hereby quoted:
To begin with, the Court hereby states that, from the totality of the evidence adduced
in this case which it scrutinized and evaluated, it has come up with a finding that there
was failure or want of consideration of the Deed of Sale of Lot 1809-G-2-C executed
in favor of the [petitioners] on October 15, 1987. The Court is morally and sufficiently
convinced that [Timoteo] had not paid to the [Bacus siblings] the price for the said
land. This fact has been competently and preponderantly established by the
testimony in court of [Julian]. [Julian] made the following narration in his testimony:
Sometime in October 1987, he and his two sisters agreed to sell to the [petitioners]
Lot No. 1809-G-2-C because they needed money for the issuance of the titles to the
four lots into which Lot 1809-G-2 was subdivided. [Timoteo] lured him and his sisters
into selling the said land by his promise and representation that money was coming
from his sister, Lucena Bacalso, from Jolo, Sulu. Timoteo Bacalso asked for two
weeks within which to produce the said money. However, no such money came. To
the shock and surprise of him and his sisters, a complaint was filed in Court against
them in Civil Case No. CEB-6693 by [Timoteo], together with nine others, when
Lucena Bacalso arrived from Jolo, Sulu, wherein they claimed as theirs Lot 1809-G.
Instead of being paid, he and his sisters were sued in Court. From then on, [Timoteo]
never cared anymore to pay for Lot 1809-G-2-C. He and his sisters just went through
the titling of Lots 1809-G-A, 1809-G-2-B, Lot 1809-G-2-C and 1809-G-2-D on their
own.
On his part, [Timoteo] himself acted in such a manner as to confirm that he did not
anymore give significance or importance to the Deed of Sale of Lot 1809-G-2-C
which, in turn, creates an impression or conclusion that he did not pay Jor the
consideration or price thereof. Upon being cross-examined in Court on his testimony,
he made the following significant admissions and statements:
1. That he did not let [Julian] sign a receipt for the sum of P8,000.00
purportedly given by him to the latter as payment for the land in question;
2. That the alleged payment of the said sum of P8,000.00 was made not in
the presence of the notary public who notarized the document but in a place
near Sto. Nino Church in Cebu City;
3. That it was only [Julian] who appeared before the notary public, but he
had no special power of attorney from his two sisters;
4. That the Deed of Sale of Lot 1809-G-2-C was already in his possession
before Civil Case No. CEB-6693 was filed in court;
5. That he did not however show the said Deed of Sale to his lawyer who
filed for the plaintiffs the complaint in Civil Case No. CEB 6693, as in fact he
suppressed the said document from others;
6. That he did not bother to cause the segregation of Lot 1809-G-2-C from
the rest of the lots even after he had already bought it already;
7. That it was only after he lost in Civil Case No. CEB-6693 that he decided
to file the present case;
8. That he did not apply for building permits for the three houses that he
purportedly caused to be built on the land in question;
9. That he did not also declare for taxation purposes the said alleged
houses;
10. That he did not declare either for taxation purposes the land in question
in his name or he had not paid taxes therefore; and
11. That he did not bother to register with the Registry of Deeds for the
Province of Cebu the Deed of Sale of the lot.1a\^/phi1
To the mind of the Court, [Timoteo] desisted from paying to [the Bacus
siblings] the price for Lot 1809-G-2-C when he, together with nine others,
filed in Court the complaint in Civil Case No. CEB-6693. He found it
convenient to just acquire the said land as supposed co-owners of Lot 1809-
G of which the land in question is merely a part of xx x:
xxxx
Thus, it is evident from all the foregoing circumstances that there was a failure to or
want of consideration of the supposed sale of the land in question to the [petitioners]
on October 15, 1987. So, the said sale could not be given effect. Article 1352 of the
New Civil Code of the Philippines is explicit in providing that 'contracts without cause
produce no effect whatsoever'. If there is no cause, the contract is void. x x x There
being no price paid, there is no cause or consideration; hence, the contract is void as
a sale. x x x Consequently, in the case at bench, the plaintiffs have not become
absolute owners of Lot 1809-G-2-C of Psd-07-022093 by virtue of the Deed of Sale
thereof which was executed on October 15, 1987 by the [Bacus siblings] in their
favor.19 (Citations omitted)
It is clear from the factual findings of the RTC that the Deed of Absolute Sale entirely
lacked consideration and, consequently, void and without effect. No portion of the
P8,000.00 consideration indicated in the Deed of Absolute Sale was ever paid by the
petitioners.1âwphi1
The Court also finds no compelling reason to depart from the court a quo's finding
that the Deed of Absolute Sale executed on October 15, 1987 is null and void ab
initio for lack of consideration, thus:
It must be stressed that the present case is not merely a case of failure to pay the
purchase price, as [the petitioners] claim, which can only amount to a breach of
obligation with rescission as the proper remedy. What we have here is a purported
contract that lacks a cause - one of the three essential requisites of a valid contract.
Failure to pay the consideration is different from lack of consideration. The former
results in a right to demand the fulfillment or cancellation of the obligation under an
existing valid contract while the latter prevents the existence of a valid contract.
Consequently, we rule that the October 15, 1987 Deed of Sale is null and void ab
initio for lack of consideration.20 (Citation omitted)

Well-settled is the rule that where there is no consideration, the sale is null and
void ab initio. In Sps. Lequin v. Sps. Vizconde,21 the Court ruled that:

There can be no doubt that the contract of sale or Kasulatan lacked the essential
element of consideration.1âwphi1 It is a well-entrenched rule that where the deed of
sale states that the purchase price has been paid but in fact has never been paid, the
clcecl of sale is null and void ab initio for lack of consideration.22 (Citation omitted)

WHEREFORE, petition is DENIED and the Decision dated December 14, 2005 of the
Court of Appeals in CA-G.R. CV No. 67516 is AFFIRMED.

SO ORDERED.
G.R. No. 119857 July 28, 2010
GOLDEN APPLE REALTY AND DEVELOPMENT CORPORATION AND
ROSVIBON REALTY CORPORATION,Petitioners,
vs.
SIERRA GRANDE REALTY CORPORATION, MANPHIL INVESTMENT
CORPORATION, RENAN V. SANTOS AND PATRICIO MAMARIL, Respondents.
DECISION
PERALTA, J.:
This is a petition for review1 on certiorari under Rule 45 of the Rules of Court seeking
to nullify and set aside the Decision2 of the Court of Appeals (CA) dated January 23,
1995 and the Resolution3 dated March 28, 1995 in CA-G.R. CV No. 40961.
The antecedent facts are the following:
On December 1, 1981, Hayari Trading Corporation (Hayari), through a Loan
Agreement,4 borrowed from Manphil Investment Corporation (Manphil) the amount of
Two Million Five Hundred Thousand Pesos (₱2,500,000.00) for the benefit of Filipinas
Textile Mills, Inc. (Filtex).
On the same date, Hayari President Yu Han Yat, Jr., his wife Terry Villanueva Yu and
the latter's uncle, Bernardino Villanueva, executed an Assumption of Joint and
Solidary Liability5 for and in consideration of the loan granted to Hayari, assuming
joint and solidary liability with Hayari for the due and punctual payment of all and/or
any amortizations on the loan, as well as all amounts payable to Manphil, in
connection therewith and for the strict performance and fulfillment of the obligation of
Hayari.
In connection therewith, Valiant Realty and Development Corporation, represented by
its General Manager Bernardino Villanueva, and Sierra Grande Realty Corporation
(Sierra Grande), represented by Terry Villanueva Yu, executed a Third Party Real
Estate Mortgage6 in favor of Manphil over a parcel of land, otherwise known as
the Roberts property.
Filtex also constituted a real estate mortgage over certain parcels of land that it
owned and also constituted a chattel mortgage over the machinery of Hayari in order
to secure payment of the loan.
Thereafter, Bernardino Villanueva suggested that the Roberts property be subdivided
to make it easier for Sierra Grande to sell the same. On June 22, 1985, as suggested,
the Board of Directors of Sierra Grande, composed of brothers and sisters Robert
Villanueva, Daniel Villanueva, Terry Villanueva Yu, Susan Villanueva and Eden
Villanueva, passed a resolution7 authorizing General Manager Bernardino Villanueva,
brother of their deceased father, to hire a geodetic engineer and cause the
subdivision plan to be approved by the Land Registration Commission, and to sell the
subdivided lots after approval of the subdivision plan, if found to be necessary and for
which the corporation may need to carry its purpose.
Eventually, on June 22, 1985, Bernardino Villanueva executed a Contract to
Sell8 the Roberts property with Golden Apple Realty and Development, Inc. (Golden
Apple), majority of its stocks are owned by Elmer Tan, a first cousin of the Villanueva
brothers and sisters, and Rosvibon Realty Corporation (Rosvibon), majority of its
stocks are owned by Rosita So, another sister of the father of the Villanueva brothers
and sisters, for the amount of ₱441,032.00. The amount of ₱10,000.00 of the
purchase price will have to be paid to the vendor upon the signing of the contract and
the balance to be paid to the mortgagee Manphil, on or before October 31, 1987.
On June 29, 1985, the Roberts property was surveyed and subdivided into four
lots,9 subject to the approval of the subdivision plan.
On July 26, 1985, Sierra Grande, through Bernardino Villanueva, finally executed a
Deed of Sale10 of Lots 1, 2 and 3, with a total land area of 1,402 square meters, to
Golden Apple, for ₱382,080.00 and another Deed of Sale 11 of Lot 4, with a total land
area of 499 sq. m., to Rosvibon for ₱119,760.00.
Meanwhile, Sierra Grande's Board, on August 29, 1985, passed a
resolution12 revoking the authority of Bernardo Villanueva to sell the Roberts property.
Hayari President Yu Han Yat, Jr., husband of Sierra Grande director Terry Villanueva
Yu, advised Manphil, through a letter13 dated August 30, 1985, that all dealings with
respect to its loan or credit facility with Manphil shall be coursed through or effected
with the express knowledge, representation or consent of the President of Hayari.
Thereafter, a resolution14 notarized on September 3, 1985 was passed by the
directors of Sierra Grande revoking the authority previously granted to Bernardino
Villanueva to negotiate and contract the sale of the Roberts property and any other
property, in behalf of the corporation and place on notice all prospective buyers or
vendees not to negotiate or contract with any party other than the duly authorized
officer or officers of the corporation who are expressly empowered to enter into such
transaction and who can exhibit a formal board resolution duly certified by the board
secretary and signed by the majority of the board of directors who are also the
majority stockholders representing at least 2/3 of the capital stock .
Nevertheless, on September 16, 1985, Elmer Tan, on behalf of the buyer
corporations, paid to Manphil for Hayari's account an amortization of ₱57,819.72, for
the principal sum due on July 27, 1985; ₱42,192.30, for Int.-CBP; ₱27,329.05, for
interest; and ₱3,423.40, as penalties.15
Sometime in January 1986, Sierra Grande learned that Bernardino Villanueva 16 tried
to secure the duplicate original title17 of the subject parcel of land from Manphil
claiming to be the President of Hayari. As a result, on November 20, 1986, Sierra
Grande, through Susan Villanueva Tan, the Corporate Secretary, wrote 18 Manphil
stating that Bernardino Villanueva was not in any way connected officially with Sierra
Grande and was not authorized to deal in any way with the Roberts property nor
borrow the transfer certificate title to the same property. Susan Tan also wrote 19 the
Bangko Sentral ng Pilipinas (BSP), as the subject property was already on
receivership, informing the latter of the following: that Hayari had not made any
request to borrow any duplicate original title; that Bernardino Villanueva was not
connected in any way with Hayari; that Bernardino Villanueva had no authority to
borrow any duplicate original title; and that whatever authorization Bernardo
Villanueva had in dealing with the Roberts propertyhad been withdrawn and
abrogated under a board resolution. The letter also requested that even if payments
were made on the loan of Hayari by a third party, the subject duplicate original title
must not be released without the express consent of Hayari.
Later, on August 15, 1988, Terry Villanueva Yu, the President of Sierra Grande at that
time, informed20 Manphil that Bernardino Villanueva and Elmer Tan had attempted to
pre-terminate Hayari's loan in order to obtain the duplicate original title of the subject
lot. It was also mentioned in the letter that Hayari may opt to pre-terminate the loan
itself and be subrogated in the right of action against Bernardino Villanueva.
However, on October 20, 1988, Manphil allowed Elmer Tan to pre-terminate Hayari's
obligation after making total payments to Manphil in the amount of ₱3,134,921.00. 21
Hence, Golden Apple and Rosvibon, on November 28, 1988, filed with the Regional
Trial Court of Pasay City, a Complaint22 against Sierra Grande and Manphil for
specific performance and damages.
On February 27, 1991, the trial court rendered its Decision,23 the dispositive portion of
which reads:
WHEREFORE, the Court hereby renders judgment for the plaintiffs and against the
defendants, ordering,
1) all defendants to surrender and deliver to plaintiffs corporations the
owner's duplicate copy of TCT No. 19801 of the Registry of Deeds for Pasay
City;
2) defendants Sierra Grande to pay plaintiffs the sums of ₱50,000.00 by way
of moral and exemplary damages, respectively;
3) defendant Sierra Grande to pay plaintiffs the sum of ₱50,000.00 as and
for attorney's fees and costs of suit.
The Counterclaim is hereby DISMISSED.
SO ORDERED.
On April 3, 1991, Sierra Grande filed a Motion for Reconsideration24 of the decision,
which was eventually denied by the trial court.25
The respondents herein filed their appeal with the CA, which reversed the decision of
the trial court in its Decision26dated January 23, 1995. The dispositive portion of the
said Decision reads as follows:
WHEREFORE, the Court REVERSES the appealed decision. We DISMISS the
plaintiffs' complaint and on defendant Sierra Grande's counterclaim, we SENTENCE
plaintiffs to pay defendant Sierra Grande ₱20,000.00, as attorney's fees and costs.
SO ORDERED.
The Motion for Reconsideration27 dated February 3, 1995 filed by herein petitioners
was later on denied by the CA.28 Thus, the present petition.
Petitioners raised the following assignment of errors:
ASSIGNMENT OF ERRORS
The respondent Court of Appeals grievously erred in:
4.1 invalidating the Deeds of Absolute Sale between "Golden Apple" and
"Rosvibon," as vendees, and "Sierra Grande," as vendor, on the primordial
premise that "badges of fraud" attended their execution;
4.2 applying Article 1602 of the Civil Code to the case at bar;
4.3 overextending Article 1602 of the Civil Code to include lack of capacity,
notarial infirmity, and conflict of interest to the concept of "badges of fraud";
4.4 invalidating the contracts on the ground of insufficiency of consideration;
4.5 invalidating the contracts on the ground of lack of legal personality of
vendee "Rosvibon Realty";
4.6 invalidating the contracts on the ground of irregularity in its execution and
in concluding that the deeds of sale were ante-dated;
4.7 invalidating the contracts on the ground of conflict of interest; and finally
4.8 disallowing damages awarded by the trial court to the petitioners.
The petition is unmeritorious.
In reversing the decision of the trial court, the CA, in a short and succinct manner,
made factual conclusions that necessitated its finding that the contracts in question
were invalid.
The said ruling of the CA is contrary to the factual findings of the trial court.
In Guillang v. Bedania,29 this Court reiterated that it is not a trier of facts, but certain
exceptions apply, thus:
The principle is well-established that this Court is not a trier of facts. Therefore, in an
appeal by certiorari under Rule 45 of the Rules of Court, only questions of law may be
raised.1avvphi1 The resolution of factual issues is the function of the lower courts
whose findings on these matters are received with respect and are, as a rule, binding
on this Court.30
However, this rule is subject to certain exceptions. One of these is when the findings
of the appellate court are contrary to those of the trial court.31 Findings of fact of
the trial court and the Court of Appeals may also be set aside when such findings are
not supported by the evidence or where the lower courts' conclusions are based on a
misapprehension of facts.32
Obviously, the contrary findings of the trial court and the CA leave this Court with no
other alternative but to re-examine some of the facts raised in the present petition.
Petitioners claim that the CA misused the term badges of fraud in reaching its
decision. According to them, Article 1602, upon which the term badges of fraud refers
to, is not applicable, because the said article refers to a sale with a right to
repurchase, whereas the subject invalidated contracts were absolute sales. They
cited a case33 where this Court pronounced that, badges of fraud is a circumstance in
Article 1602 of the Civil Code, which, if present in any given transaction, gives rise to
the presumption that it is not a sale but an equitable mortgage. Thus, according to
petitioners, the CA confused Article 1602 (1) with that of Article 1470, 34 because both
articles deal with sale in general and have inadequacy of price as subject matter.
Either way, they argue, the inadequacy of the price does not result in the cancellation
or invalidation of contracts.
However, the above argument of petitioners is speculative. A close reading of the CA
Decision would reveal that the said court used the phrase badges of fraud to refer to
certain fraudulent acts that attended the execution of the Contract to Sell and the
Deeds of Absolute Sale which would eventually tend to prove that the same
transactions were indeed suspicious as the said contracts were antedated, simulated
and fraudulent. The said findings were pointed out by the CA in this manner:
We declare the contracts invalid.
We find that there were badges of fraud showing that the contracts were simulated
and fraudulent.
First, one of the vendees, Rosvibon, was incorporated only on July 8, 1985 (Exhibit
"17-A"). Thus, at the time the Contract to Sell was executed, Rosvibon Realty
Corporation had no legal personality to purchase the property.
Second, the deeds of absolute sale were executed irregularly. The notarial
acknowledgment did not indicate the residence certificates of the vendees which were
in fact obtained subsequent to the date of notarization. This is an anomaly which
shows that the deeds of sale were ante-dated to beat the resolution revoking the
vendor's authority to sell.
Third, there was no sufficient consideration paid for the property involved and, worse,
was attended with fraudulent conflict of interest because the vendor, Bernardino
Villanueva, was a stockholder of the buyer corporations.35
This then refutes the whole discussion of petitioners as to the misuse or
misappreciation of the applicable laws by the CA in arriving at its judgment. Again, an
examination of the CA’s Decision shows that the phrase did not refer to any particular
provision of a law, hence, the general and ordinary meaning of the phrase prevails. In
the same manner, this Court, in numerous cases36 concerning various subjects, has
used the same phrase in its rulings referring to the said phrase's general and ordinary
meaning.
Petitioners also contend that whether or not one of the vendee corporations is not yet
in existence at the time the Contract to Sell was executed cannot be directly
questioned by any party to a suit as the existence of a corporation may only be
attacked by the Government through the Solicitor General in a quo
warranto proceeding called for the purpose and not by a collateral attack whereby the
corporate existence is questioned in some incidental proceedings not provided by law
for the express purpose of attacking the corporate existence.
That particular line of argument is an over-stretch. It is undisputed that petitioner
Rosvibon had no legal personality at the time of the execution of the Contract to Sell.
As stated by the petitioners themselves in their petition:
x x x It is worthy to note at this juncture, that while it may be true that one of the
vendees corporation, Rosvibon, does not have the personality to enter into a
Contract to Sell on June 22, 1985, as it was only incorporated on July 8, 1985, it
cannot be said that said corporation does not have the personality to enter into the
Contract of Sale as the said contract was executed on 26 July 1985. 37
It bears to stress, however, that the CA did not pass upon the corporate personality of
Rosvibon nor did it declare the same corporation's franchise invalid. Thus, there is no
need for a quo warranto proceeding as claimed by petitioners. The CA merely made
the finding which is undisputed by the petitioners that Rosbivon had no legal
personality at the time of the execution of the Contract to Sell. According to the CA,
because of Rosbivon's lack of personality at the time of the execution of the Contract
to Sell, its presence as a party to the same transaction is taken as another indication
that fraud was indeed attendant. This is one of the situations included, and comprising
the phrase badges of fraud.
As to the contention of petitioners that the CA erred in invalidating the contracts on
the ground of notarial infirmity and concluding that they were ante-dated, this Court
finds the said argument devoid of any merit.
Petitioners claim that, since the representative of the corporation appeared before the
Notary Public, the acknowledgment was complied with, even if they admitted that the
representatives of the corporations which executed the Deeds of Absolute Sale did
not present their residence certificates nor indicate the number, date and place of
issue of the same residence certificates in the acknowledgment. As shown in the
records and in the testimony of the Notary Public, Atty. Melanio L. Zoreta, the
requirement of the presentation of the residence certificate was missing. Thus, as
testified:
On Cross-examination:
Atty. Alindato
Q: But you are sure, of course, that this document was completed in its form without
any additional data to be filled up, Mr. Witness, except your signature and the date
and the document number, and the page number, etc. And of course, the dry seal?
A: I could remember, sir, that it took upon me to see that the residence certificate of
the corporation being represented by Mrs. Rosita So and Elmer Tan did not have the
residence certificate.
But upon the assurance of Mr. Bernardino Villanueva that they will just put it
afterwards, I notarized it because as far as I am concerned, as a notary public, as
long as I know the persons who appeared before me and they have so identified
themselves the company or entity that they are representing would be of legal ground
already.
Q: So you are changing your previous answer that this document was represented to
you was already complete when you said that in your latest answer that there were
numbers of residence certificate which are lacking?
A: Actually, I am changing my answer but you asked again for me for the second
time. That is why I took note that the residence certificate of the two corporations
were not yet then typewritten or given by the parties involved.38
The CA then had a basis in concluding the defect in the notarial requirement of the
transaction. The pertinent provisions of the Notarial Law39 applicable at that time
provides:
Sec. 251. Requirement as to notation of payment of cedula tax – Every contract,
deed, or other document acknowledged before a notary public shall have certified
thereon that the parties thereto have presented their proper cedula certificates or are
exempt from the cedula tax, and these shall be entered by the notary public as a part
of such certification, the number, the place of issues, and date of
each cedula certificate as aforesaid.
Another issue raised by petitioners is that the CA erred in voiding the contracts on the
ground of insufficiency of consideration or price, because the claim of inadequacy of
price must be proven and that the respondents belatedly questioned the contracts'
validity. They further claim that the consideration was substantial and adequate.
It must be noted that the property in question, subject of the Contract to Sell for the
sum of ₱441,032.00, is a land with a contained area of, more or less, One Thousand
Nine Hundred and One (1,901) sq. m. with a two-storey residential building located in
Pasay City. In claiming that the said price of the property is not inadequate,
petitioners stated that the payment of Elmer Tan to pre-terminate Hayari's obligation
amounting to Three Million One Hundred Thirty-Four Thousand Nine Hundred
Twenty-One Pesos (₱3,134,921.00) as part of the consideration paid for the property
should be included. However, as correctly argued by respondent Sierra Grande, the
amortizations paid by Elmer Tan to Manphil was for a loan incurred by Hayari and not
by respondent Sierra Grande; thus, any payment of the amortizations on the loan of
Hayari cannot be considered as part of the consideration for the sale of the land
owned by respondent Sierra Grande. It is then safe to declare that respondent Sierra
Grande did not benefit from the loan or from its pre-termination. Moreover, the
records are bereft of any evidence to support the claim of petitioners that the sum of
money paid by Elmer Tan, on behalf of Hayari, was part of the consideration for the
same property. What only appears is that the only consideration paid for the sale of
the Roberts property was the sum contained in the Contract to Sell, which was
₱441,032.00 which, considering the size40 and location41 of the property, is
inadequate. What prompted Elmer Tan to pay the total amount of ₱3,134,921.00
cannot be gleaned from the records, except that it was for the loan incurred by Hayari,
which is an independent juridical entity, separate and distinct from Sierra Grande.
Hence, the CA did not commit any error in declaring that there was an insufficiency of
consideration or price as the same is shown on the very face of the Contract to Sell.
Anent the contention of petitioners that inadequacy of price does not invalidate a
contract, the said rule is not without an exception. As provided in the Civil Code:
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not
invalidate a contract, unless there has been fraud, mistake or undue influence.
The CA was clear as to its main reason for invalidating the contracts in question –
there was fraud. The inadequacy of price was merely one of the circumstances upon
which the CA was able to find the existence of fraud and not the main cause for the
invalidation of the subject contracts.
All the other sub-issues raised by petitioners are rendered inconsequential by the
above disquisitions of this Court.
WHEREFORE, the petition for review on certiorari dated May 3, 1995
is DENIED. Consequently, the Decision dated January 23, 1995 and the Resolution
dated March 28, 1995, of the Court of Appeals, are hereby AFFIRMED.
SO ORDERED.
 G.R. No. 172983 July 22, 2015 Sta. Mesa, Manila 12,500,400 10,213,0

FAR EAST BANK AND TRUST COMPANY, Petitioner, Bacolod City 12,522,900 9,728,0
vs.
Melencio Street, Cabanatuan City 3,878,600 3,157,5
PHILIPPINE DEPOSIT INSURANCE CORPORATION, Respondent.
A.V. Fernandez Avenue, Dagupan City 9,873,000 8,325,0
DECISION
E. Tañedo Street, Tarlac, Tarlac 5,622,000 5,227,0

BRION, J.: A. Flores Street, San Pablo City 3,434,800 3151,8

Cebu City 3,921,700 3,112,2
Before the Court is a petition for review on certiorari1 filed by the petitioner Far East
Bank and Trust Company (FEBTC), assailing the May 31, 2006 decision 2 of the Court Davao City 6,844,200 5,938,8
of Appeals (CA) in CA-G.R. C.V. No. 56624.
Iloilo City 5,383,000 3,803,0
The CA decision reversed and set aside the orders dated February 26, 1997, and Quezon Avenue, San Fernando, La Union 3,587,800 2,729,4
May 21, 1997, of the Regional Trial Court (RTC), Branch 31, Manila, in Special
Proceeding No. 86-35313. Laoag City 1,781,000 1,293,0
Bo. Centro, Legaspi City 3,132,300 2,400,0
The Factual Antecedents
Poblacion, Naga City 6,280,900 5,569,6
On July 5, 1985, the Central Bank of the Philippines (Central Bank) issued Monetary
Grand Total ₱105,329,350 ₱87,226,0
Board (MB) Resolution No. 699, placing Pacific Banking Corporation (PBC) under
receivership. 3
Rounded To ₱105,329,000 ₱87,226,0

On October 28, 1985, the Central Bank formally invited banks to submit their On November 22, 1985, the Monetary Board issued MB Resolution No. 1234,
proposals for the purchase of the assets and franchise of the various offices of the accepting the FEBTC's bid after finding it as the most advantageous. 10
PBC and the assumption of an equivalent amount of the PBC' s liabilities. 4

On April 16, 1986, the FEBTC as the buyer, the PBC as the seller, and the Central
In answer to the formal invitation, the FEBTC submitted its bid 5 on November 14, Bank entered into a Memorandum of Agreement (MOA). The PBC was represented
1985. by its Liquidator Renan V. Santos (Liquidator Santos)11 who was then the Special
Assistant to the Central Bank Governor.
The FEBTC's bid covered the purchase of the PBC's non-fixed and fixed assets and
the assumption of the PBC's recorded liabilities.6 According to the bid, the fixed Section 112 of the MOA stated that the parties shall execute an absolute purchase
assets are those described in the Asian Appraisal Report of August 1, 1984, and agreement covering all the assets of the PBC.13 Specifically, these assets covered
August 9, 1984 (Asian Appraisal Report), which the FEBTC offered to purchase at a the non-fixed assets, as provided under Section 3(a)14 of the MOA and the fixed
price equivalent to the sound values indicated in the report, subject to the discounts assets. defined under Section 3(c).15 Reflecting the FEBTC's bid, Section 3(c)16 of the
proposed in the bid.7 MOA stated that the fixed assets are those enumerated in the Asian Appraisal Report
dated August 1984.17
Specifically, the assets and their corresponding valuation that were enumerated in the
Asian Appraisal Report8 are as follows: The parties agreed, however, in Section l(a)(vii) of the MOA that the PBC assets
submitted to the Central Bank as collaterals shall be excluded from the purchase.18
Cost of Reproduction Sound Value
In accordance with Section 1(a)19 of the MOA, the PBC as the seller, the FEBTC as
bao, Quezon City, Metropolitan Manila ₱19,604,000 ₱16,844,000
the buyer, and the Central Bank, executed a purchase agreement (PA) for the
co, Manila 3,836,000 FEBTC's purchase of the PBC assets and the assumption of its liabilities. 20 The PBC
3,288,000
was again represented by Liquidator Santos.
. Cruz, Manila (Soler)9 3,126,750 2,455,750
The PA merely covered the non-fixed assets of the PBC and did not include the fixed
assets agreed upon under Section 3(c)21 of the MOA.22
The parties acknowledged, however, that there were other assets not yet covered by
the PA and that the parties may agree, within a period of ninety (90) days from the
effectivity date of the PA, to purchase the additional assets.23The parties agreed that
the effectivity date of the PA shall be the date of its approval by the Liquidation
Court.24
The PA was approved25 by the Monetary Board on October 24, 1986, and by the
RTC, as the liquidating court, on December 18, 1986.26
According to the FEBTC, it complied with its obligation under the MOA, including the
payment of ₱260,000,000.00 as additional consideration for the
purchase.1avvphi1 The FEBTC also took possession and custody of the fixed assets
of the PBC, including those mentioned in the Asian Appraisal Report, and opened its
branches thereon including the servicing of the PBC's deposit liability. 27
In January 1987, the FEBTC wrote a letter to Liquidator Santos, following up the
execution of the deeds of sale over the fixed assets of the PBC. 28
Initially, Liquidator Santos positively responded to the FEBTC request by furnishing it
with copies of the transfer certificates of title of the fixed assets. 29 However, he failed
to execute the purchase agreement covering the disputed fixed assets. 30
The respondent Philippine Deposit Insurance Commission (PDIC), thereafter, took
over as the new PBC Liquidator. The PDIC President Mr. Vitaliano Nañagas II
(Liquidator Nañagas) replaced Liquidator Santos.
Liquidator Nañagas informed the FEBTC that all the fixed assets of the PBC can be
purchased only at their present appraisal value which is much higher than their sound
value.31 He also proceeded to start the bidding or negotiated sale to third persons of
the PBC's fixed assets, including those enumerated in the Asian Appraisal's Report. 32
This move prompted the FEBTC to file before the RTC (the Liquidating Court) a
motion to compel the Liquidator to execute the implementing deeds of sale over the
disputed PBC fixed assets,33 with application for the issuance of preliminary injunction
and/or temporary restraining order (TRO).34
The disputed fixed assets are the PBC branches located at the following sites:
1. Soler (Arranque)
2. Bacolod City
3. Cabanatuan City
4. San Pablo City
5. Cebu-Manalili
6. Davao-Sta. Ana
7. San Fernando, La Union
8. Legaspi City
9. Iloilo City-Central Market
10. PBC Condominium Bldg.-Paseo de Roxas
The PBC Condominium Bldg.-Paseo de Roxas was sold to Security Bank and Trust
Company in the RTC-approved compromise agreement with PDIC and FEBTC; thus,
this PBC asset is no longer in dispute.35
The RTC issued a TRO, directing the PDIC to desist from proceeding with the bidding
or negotiated sale of the PBC fixed assets.36
However, on November 16, 1993, the RTC denied the FEBTC's prayer for the
issuance of a writ of preliminary injunction and declared the TRO automatically
dissolved.37 The RTC likewise ruled that the disputed assets had been submitted as
collaterals with the Central Bank and are therefore excluded from the purchase
pursuant to Section l(a)(vii)38 of the MOA.39
The CA and the Court affirmed the R TC' s order denying the preliminary injunction.40
The Motion-for-Intervention of Central
Bank Board of Liquidators before the
Court
On December 4, 2013, the Central Bank Board of Liquidators (CBBOL) filed before
the Court a motion for leave to intervene with motion for extension to file its
memorandum-in-intervention.41 In its memorandum-in-intervention,42the CB-BOL
alleged that the PBC had assigned to it the disputed fixed assets by virtue of a deed
of assignment.43The FEBTC filed its opposition44 to the motion for leave to intervene.
The Court granted the motion for leave to intervene in its Resolution dated August 13,
2014.45 The Court ruled that the CB-BOL is a necessary party in the case since it is
the transferee of the properties in litigation. Additionally, since the case arose from the
liquidation proceedings before the RTC, it is only proper that the Court decide who -
between FEBTC (as the alleged purchaser) and the Central Bank (the creditor and
the PBC's former liquidator) - has the superior right over the disputed properties.46
The RTC Ruling
After the trial on the merits, the RTC issued the assailed order dated February 26,
1997: (1) directing the PDIC to execute the implementing deeds of absolute sale in
favor of the FEBTC; and (2) ordering the FEBTC to pay the price for the fixed assets
in the amount equivalent to their sound values as stated in the Asian Appraisal
Report.47
The RTC concluded that, first, there was a perfected contract of sale or direct
purchase of the disputed fixed assets under both the MOA and the PA; these fixed
assets were identified and valuated in the Asian Appraisal Report. 48
Furthermore, the amount of ₱260,000,000.00 that the FEBTC previously paid
pursuant to the MOA was part of the consideration and did not merely serve as
authority to operate and reopen the PBC branches.49
Second, the RTC ruled that the fixed assets were not actually submitted as collaterals
with the Central Bank, as admitted by Ms. Teresa Salcor who was an Account Officer
of the Central Bank Board of Liquidators.50 Therefore, the disputed assets should not
be excluded from the assets that the FEBTC purchased under the MOA.
According to the RTC, Ms. Salcor also admitted that the FEBTC was not notified that
the disputed assets were mortgaged to the Central Bank. 51
Third, the authenticity of the deeds of real estate mortgage submitted to the court was
suspicious. The deeds and annexes were not signed and did not bear any notarial
seal, contrary to the statement in the acknowledgment portion of the deeds.
The alleged mortgages were also not annotated on the respective titles of the
mortgaged properties, and hence, were not binding on third parties such as the
FEBTC.
Lastly, after the execution of the MOA and the PA in 1986, the FEBTC immediately
took possession of the fixed assets and introduced improvements thereon with the
knowledge of the PDIC. It was only in June 1993 that the PDIC assessed rentals for
the use and occupation of the disputed assets.52
On May 21, 1997, the RTC denied the PDIC's motion for reconsideration, prompting
the PDIC to file an appeal with the CA.53
The CA Ruling
The CA granted the petition and reversed the RTC's decision.54
First, the CA relied on the RTC's initial findings during the preliminary injunction
proceedings that the disputed fixed assets had been submitted as collaterals with the
Central Bank and are thus excluded from the purchase. 55 The CA emphasized that
this RTC ruling was upheld by the CA and by the Court.56
Second, the CA concluded that the parties intended the PA to be the final and
absolute repository of the terms of their transactions. Although the RTC subsequently
found that the fixed assets were not submitted as collaterals to the Central Bank, the
fact remains that these were not included in the PA and, therefore were not
purchased by the FEBTC.57
Third, since the PA was the final repository of the parties' agreement, Section 10 of
the MOA (which provides that the ₱260 million shall be paid by the FEBTC as further
consideration) should yield to Section 9 of the PA which provides that the ₱260 million
was paid as a premium concomitant with the transfer of authority to the FEBTC to
open and operate the 43 banking offices/branches of PBC. 58
Based on the above reasons, the CA ruled that the RTC erred in directing the
Liquidator to execute the deeds of sale over these properties. 59
The Parties' Arguments
The FEBTC Arguments
The FEBTC argues that, first, the CA failed to address the real issue and had decided
the case on the bases of a non-issue, by ruling that the disputed fixed assets of the
PBC were not part of the assets that the FEBTC purchased under the PA. 60 The real
issue is whether or not there had been a perfected contract of sale under the MOA
among the FEBTC, the PBC, and the Central Bank, which imposed upon the
Liquidator the obligation to execute the deeds of sale over the disputed fixed assets. 61
Second, the FEBTC further argues that the MOA adopted the FEBTC's bid to
purchase all the PBC's fixed assets as described in the Asian Appraisal Report on the
basis of its sound value less any assigned depreciation accruing thereon from August
1984 up to the valuation date. The MOA further clarified that the ₱260 million bid price
proposed by the FEBTC was a premium to be paid as further consideration for the
sale of the assets and the assumption of the liabilities of PBC.62
Lastly, the CA erred in relying on the initial findings of the R TC that the disputed fixed
assets had been submitted to the Central Bank as collateral and were thus excluded
from the purchase under the MOA.63
The PDIC Arguments
The PDIC countered that first, the CA was correct when it addressed the issue of
whether or not the FEBTC acquired ownership over the disputed PBC fixed assets. 64
Second, the CA was correct in ruling that the PA was the final and absolute repository
of the terms of the sale transaction between the parties and not the MOA. 65
The PDIC also adopted the CA's findings that even if the disputed assets had not
been mortgaged, still FEBTC did not directly purchase these assets either under the
MOA or the PA.66
 The Court's Ruling
The issue in this case is whether or not the PDIC, as the Liquidator of the PBC, may
be compelled to execute the deeds of sale over the nine (9) 67 disputed PBC fixed
assets.
We rule in the affirmative, as there was a perfected contract of sale over the disputed
fixed assets.
The FEBTC's bid or offer included the purchase of selected assets of the PBC
consisting of the fixed and non-fixed assets, as follows:
"Our Bid is as follows:
I. The Purchase
We will purchase all assets of PaBC less the following items

It is well-established that a contract undergoes various stages that include its (a) Past Due Loans
negotiation or preparation, its perfection, and finally, its consummation. 68
(b) Items under Litigation
Negotiation covers the period from the time the prospective contracting parties
indicate interest in the contract to the time the contract is concluded (perfected). The
perfection of the contract takes place upon the concurrence of its essential elements. (c) DOSRI Loans
A contract which is consensual as to perfection is so established upon a mere
meeting of minds, i.e., the concurrence of offer and acceptance, on the object and on (d) Acquired Assets
the cause or consideration. The consummation stage begins when the parties
perform their respective undertakings under the contract, culminating in its (e) Loans/ Assets which correspond to the foreign currency
extinguishment.69 deposits/liabilities excluded in accordance with No. 1, below

Specifically, contracts of sale are perfected by mutual consent, when the seller (f) Other assets with unrealizable values as shall be agreed upon
obligates himself, for a price certain, to deliver and transfer ownership of a specified by us.
thing or right to the buyer over which the latter agrees. 70

The value of the assets purchased will be matched with the PaBC liabilities which we
Mutual consent, as a state of mind, may only be inferred from the confluence of two will assume, to wit:
acts of the parties: an offer certain as to the object of the contract and its
consideration, and an absolute acceptance of the offer, i.e., with respect to the exact
object and consideration embodied in the offer. While it may not be possible to expect xxxx
the acceptance to echo every nuance of the offer, it is imperative that it assents to
those points in the offer that, under the operative facts of each contract, are not only In addition to the above,
material but motivating as well.71
a) As further consideration of our bid, we shall be authorized to
Simply put, a contract of sale is perfected upon the meeting of the minds of the operate forty-two (42) branches of PaBC in the manner and under
parties on the essential elements of the contract, i.e., consent, object certain, and the the terms mentioned in our Bid Prices (See No. II below).
consideration of the contract.
xxxx
Based on the above well-established principles, the Court rules that the essential
elements of a contract of sale are present in the MOA as confirmed by the FEBTC's
c) The determination of the assets and liabilities will be done by an
bid and the provisions of the MOA and the PA. This conclusion becomes more
acceptable independent auditor whose opinion shall be considered
apparent upon a closer review of the developments in the various stages of the
final and shall mutually bind us.
parties' contract of sale, as discussed below.

d) Fixed assets shall be valued based on the sound values per

The negotiation stage of the contract of sale
Asian Appraisal Report of August, 1984, subject to the
discounts stated in our Bid Prices.
As mentioned above, the FEBTC submitted its bid72 to the Central Bank in response
to the latter's invitation to submit a formal proposal for the purchase of the assets of
xxxx
the PBC.
 i) It is understood that our bid concerns merely the purchase of
certain assets and liabilities of PaBC including the authority to
operate its branches. xxx
II. The Bid Price
1. We are willing to pay CB, inclusive of the amount which will be
paid to the existing shareholders, the following individual bid prices
subject to the following conditions:
a. The sum of PESOS: THREE HUNDRED SIXTY
MILLION (₱360,000,000.00), provided that:
i. within two (2) years from the date of our
takeover, we shall be authorized to relocate any
of the PaBC branches to other service areas
irregardless (sic) of category without the need of
investment in government securities. Branches
which will not be relocated will be opened within a
period of one (1) year, and
ii. there will be a discount of ten percent (10%)
on the sound value of the fixed asset as
determined in letter d., above;
OR
b. The sum of PESOS: THREE HUNDRED TEN MILLION
(₱310,000,000.00), provided that,
i. within two (2) years from the date of our
takeover, we shall be authorized to relocate any
of the PaBC branches to other service areas in
the same category and/or lower category areas,
without the need of investment in government
securities. Branches which will not be relocated
will be opened within a period of one (1) year,
and
ii. there will be a discount of eight percent (8%) of
the sound value of the fixed assets determined in
letter d., above;
OR
c. The sum of PESOS: TWO HUNDRED SIXTY MILLION
(₱260,000,000.00), provided that:
i. within a period of one (1) year from the date of
takeover we shall be authorized to relocate any of
the PaBC branches to other service areas of the
same category and/or lower category areas,
without the need of investment in government
securities. Branches which will not be relocated
will be opened within a period of one year, and
ii. there will be a discount of five per cent (5%) of
the sound value of the fixed assets per letter d.,
above;
OR
d. The sum of PESOS: TWO HUNDRED FIFTEEN
MILLION (₱215,000,000.00), provided that: i. within a
period of one (1) year from the date of takeover, we shall
be authorized to relocate any of the PaBC branches to
other service areas of a lower category; and
ii. there will be no discount on the sound value of
the fixed assets as determined by Asian
Appraisal Report of August, 1984.
2. The terms of payment of our bid price is as follows:
a. A downpayment of thirty percent (30%) of the bid price upon the
completion and execution of all documents necessary for us to take
over the purchase of all the assets and liabilities mentioned in No. 1
above; and
b. The balance equivalent to seventy percent (70%) of the bid price
to be paid in equal semi-annual installments for five (5) years at
fourteen percent (14%) per annum.
3. We are agreeable to deposit with the CB the sum of PESOS: FIVE MILLION
(₱5,000,000.00) upon the acceptance of our proposal, applicable against the
premium payable to CB, and further conditioned, that in the event we fail to implement
our proposal within sixty (60) days from the date that all the legal requirements and
conditions of our takeover of the assets of the PBC have been complied with and
delivered to us, the ₱5 million will be forfeited in favor of CB. xxx" [emphasis supplied]
In all the alternative bids above, the FEBTC consistently stated its intent: (1) to
include the purchase of the fixed assets enumerated in the Asian Appraisal's Report
of August 1984; and (2) that these fixed assets are to be valued based on their sound
values pursuant to the Asian Appraisal Report of August 1984, subject to discount.
The perfection stage of the contract of sale
Subsequently, the FEBTC, the PBC, and the Central Bank entered into a MOA that
essentially adopted the FEBTC's bid.
Specifically, Section 1(a)73 of the MOA· adopted the FEBTC's bid to purchase all the
PBC' assets, subject to proposed exclusions from the fixed assets to be purchased.
Section l(a) added a category of assets that were excluded from the purchase -
assets that had been submitted to the Central Bank as collaterals.
Section 1(b)74 of the MOA likewise adopted the FEBTC's offer to match the value of
the assets purchased with the PBC's liabilities.
Among the alternative bids of the FEBTC in its bid offer, the parties chose bid
Il(1)(d)75 above, as incorporated in Sections 10(a)76 and (b)77 of the MOA.
Furthermore, on the terms of payment, the FEBTC's offer in 11(2) was
substantially incorporated in Sections 10(c)(i),78 10(c)(ii),79 and 10(d)80 of the
MOA.
The MOA covered, therefore, the purchase of the non-fixed assets and the disputed
fixed assets, their valuation and the manner of payment, including discounts. The
MOA contained the PBC's acceptance, as represented by the Liquidator and by the
Central Bank, of the relevant provisions of the FEBTC bid; and the FEBTC's
acceptance of any changes or counter-offer made by the Liquidator and by the
Central Bank.
We thus find it clear that the essential elements for the perfection of a contract of sale,
i.e., object, consideration, and consent were present in the MOA. These elements are
discussed in detail below.
a) Object of the contract
The object of the contract covered the purchase of the PBC's assets as defined under
Sections 1(a),81 3(a)82 and 3(c)83 of the MOA, specifically the following:
First, the non-fixed assets;84
Second, the fixed assets as contained in the Asian Appraisal's Report, which include
the disputed fixed assets;85and
Third, the authority to re-open/relocate any of the PBC's branches to other service
areas within eighteen (18) months from the date of the execution of the Absolute
Purchase Agreement.86 b) Consideration and Manner of Payment
i. for the non-f fixed assets
For the non-fixed assets, Section 1(b)87 of the MOA provides that it shall be
compensated and matched by the FEBTC's simultaneous assumption of the liabilities
of the PBC in an amount that should be at least equivalent to the value of the assets
purchased as determined and valuated by the SGV & Co., whose opinion shall be
considered final and mutually binding on the parties. The reckoning period of the
valuation was provided under Section 3(b)88 of the MOA. ii. for the fixed assets
The consideration for the fixed assets shall be their sound value less any assigned
depreciation accruing thereon from August 1984, up to the valuation date as
described in the Asian Appraisal's Report of August 1984, which was incorporated in
the MOA by way of reference.89
There shall also be a discount of five percent (5%) of the value of the fixed assets
pursuant to the valuation of the Asian Appraisal of August 1984, less their assigned
depreciation from the date of the Appraisal's report to the date of the execution of the
Absolute Purchase Agreement.90
iii. additional consideration for the purchase o/the PBC's assets
In addition to the consideration for the fixed and non-fixed assets, the parties
likewise agreed that the FEBTC shall pay an additional or further consideration
of ₱260,000,000.00 for the sale of assets and the assumption of the liabilities of
the PBC.91
The MOA also set the manner of payment for the additional consideration
above,92 with an agreement that upon the execution of the MOA, the FEBTC shall pay
₱5,000,000.00, which shall be applied against the downpayment for the
₱260,000,000.00 additional consideration.93
Thus viewed, the parties clearly had a meeting of minds on the essential
elements of the contract, perfecting therefore their contract of sale. This
meeting was embodied in their MOA which contained the absolute acceptance
of the offer and the essential elements of the contract of sale.
Consummation stage, which includes
the execution of an absolute
purchase agreement over the non-
fixed assets
That the contract was already perfected could be confirmed by supervening events
enumerated below which prove that the parties consummated the perfected contract
of sale: First, the FEBTC's down payment of ₱5,000,000.00 upon the execution of the
MOA was intended to be part of the purchase price as it was part of the additional
consideration of ₱260,000,000.00 referred to in Section 10(c)(i) 94 of the MOA. The ₱5
million downpaymen:t therefore is earnest money and is proof of the perfection of
contract pursuant to Article 148295 of the New Civil Code.
Second, as correctly found by the RTC,96 the FEBTC took possession of the subject
fixed assets immediately after the execution of the MOA and the PA. In fact, the
FEBTC introduced improvements thereon with the knowledge of the Liquidator,
without the latter demanding any payment of rent from the FEBTC. It was only in 1993
that the Liquidator demanded the payment of rentals.
Third, the parties executed the PA over the non-fixed assets as contemplated under
Section 1(a)97 of the MOA.
Although the PA did not cover the purchase of the fixed assets, the parties ensured in
Section 498 of the PA that they may still execute another purchase agreement for the
assets that, due to time constraints, were not included in the PA. That the parties
contemplated a purchase agreement for the fixed assets is evident since these are
the only remaining assets purchased under the MOA that have not been covered by a
purchase agreement.
Fourth, upon the request of FEBTC preparatory to the execution of the purchase
agreement for the fixed assets, Liquidator Santos (who signed both the MOA and the
PA) delivered to FEBTC the corresponding transfer certificates of titles over the
disputed assets.
In these lights, the CA clearly erred when it ruled that there was no perfected contract
of sale over the disputed fixed assets simply because the PA did not include these
fixed assets.
A contract of sale is perfected by the meeting of the minds of the parties regardless of
whether it was reduced to writing.
In Limketkai Sons Milling, Inc. v. CA,99 we ruled that the fact that the deed of sale still
had to be signed and notarized did not mean that no contract had been perfected. A
binding contract may exist between the parties whose minds have met, although they
did not affix their signatures to any written document, as acceptance may be
expressed or implied.
Furthermore, a sale of land, once consummated, is valid regardless of the form it may
have been entered into. The law or jurisprudence does not mandate that the contract
of sale be put in writing before such contract can validly cede or transmit rights over a
certain real property between the parties themselves.100
In view of the perfection of the contract of sale, the execution of the PA over the
fixed assets, like the executed PA over the non-fixed assets, falls under the
consummation stage and not the perfection stage.
We emphasize that a contract is the law between the parties. Absent any allegation
and proof that the contract is contrary to law, morals, good customs, public order or
public policy, it should be complied with in good faith.101
Pursuant to the obligatory nature of the contract under Article 1356 102 of the New Civil
Code, the terms of the perfected contract of sale over the disputed fixed assets are
reciprocally demandable from both parties. Therefore, the Liquidator and the CB-BOL
as the intervenor, must execute the corresponding deeds of sale in favor of the
FEBTC and the FEBTC must pay the agreed purchase price of these assets.
The PA did not modify but confirmed
the contract of sale that was
perfected under the MOA
We now address the CA's ruling that the PA was the final repository of the
transactions of the parties or, in other words, that the sale was perfected only with the
execution of the PA.
We disagree with the CA on this point.
The perfected contract of sale of the disputed assets under the MOA remained
unaltered by the PA. To emphasize, the execution of the PA falls under the
consummation stage of the contract. The PA also did not modify the MOA. In fact, the
PA even strengthened the perfection of the contract of sale with respect to the fixed
assets, as shown by the provisions of the PA. Consider that:
First, in Section 4103 of the PA, the parties acknowledged that there were other assets
covered by the MOA but were not covered by the PA. The only logical interpretation
of Section 4 is that the parties contemplated the purchase agreement for the fixed
assets as these are the only remaining assets purchased under the MOA that have
yet to be covered by a purchase agreement.
Second, the same Section 4 of the PA provided a period within which the parties
should enter into a purchase agreement for the sale of the additional assets, i.e.,
within ninety (90) days from the effectivity of the PA.
According to Section 12(a)104 of the PA, the effective date of the PA is the date of its
approval by the Liquidating Court.
The RTC, as the liquidating court, approved the PA on December 18, 1986.
Notably, on January 15, 1987, which is well within the 90-day period provided under
Section 4 of the PA, the FEBTC wrote then Liquidator Santos for the purchase of the
fixed assets as agreed upon in Section 3( c) of the MOA. The letter states that:
"Gentlemen:
Under the conditions under which we were requested by the Central Bank to bid for
the assets of the PaBC and pursuant to Section 3(c) of our Memorandum of
Agreement dated 16 April 1986, we would like to proceed with the 2nd tranche on the
purchase of the fixed assets of PaBC on the sale to us of the following branch sites:
1) Soler, Quiapo; 2) Bacolod City; 3) Cabanatuan City; 4) Dagupan City; 5) San Pablo
City; 6) Cebu City; 7) Davao City; 8) San Fernando, La Union; 9) Laoag; 10) Legaspi
City; 11) Iloilo City. The above purchase price is net of depreciation as of September
30, 1986, and the 5% discount as agreed upon in the aforementioned Memorandum
Agreement. xxx"105
This letter was admitted as evidence by the Liquidating Court in its order dated
September 7, 1993.106
Therefore, the FEBTC timely demanded the implementation of the perfected contract
of sale over the fixed assets of the PBC, consistent with Section 3(c)107 of the MOA
and within the conditions set under Sections 4108 and 12(a)109 of the PA.
The disputed fixed assets were not
submitted as collaterals with the
Central Bank and are thus not
excluded from the purchase
The CA also erred in relying on the initial R TC findings that the disputed fixed assets
were excluded from the sale because they were submitted as collaterals to the CB.
This RTC ruling was issued when it denied the FEBTC's prayer for preliminary
injunction. The CA gave weight to the fact that this R TC ruling was affirmed both by
the CA and the Court.
Again, we disagree with the CA's conclusions.
The affirmation by the CA and by this Court of the RTC's order denying a preliminary
injunction on the ground that the disputed assets were submitted as collaterals does
not preclude the RTC from issuing a different ruling after trial on the merits.
In Olalia, et al. v. Hizon, et al.,110 the Court ruled that the determination of the
issuance of a writ of preliminary injunction is based on evidence tending to show that
the action complained of must be stayed so that the movant will not suffer irreparable
injury or that the final judgment granting him relief will not become ineffectual.
Necessarily, the evidence needs only be a "sampling," and is submitted merely to
give the court an idea of the justification for the preliminary injunction pending the
decision of the case on the merits. The evidence submitted at the hearing on the
motion for the preliminary injunction is not conclusive of the principal action, which
has yet to be decided.
The appellate court's review of the trial court's issuance of a preliminary injunction
does not include a final determination of the merits of the case; it is only a
determination of whether the preliminary injunction has been properly issued. 111
In the present case, the Court finds that the R TC' s findings after trial on the merits
are more credible as opposed to the CA's misguided reliance on the ruling of the RTC
in the preliminary injunction.
After trial on the merits, the RTC ruled that the disputed fixed assets had not been
submitted as collaterals to the Central Bank. The findings of the RTC were based on:
(1) the testimonies and admissions of Ms. Teresa Salcor, who was then an Account
Officer of the Central Bank Board of Liquidators; and (2) the RTC's examination of the
purported deeds of real estate mortgage over the disputed fixed assets.
First, the RTC found that the FEBTC was not informed that the disputed assets were
one of those submitted as collaterals to the Central Bank, as testified to by Ms.
Teresa Salcor.112 She also admitted during her testimony that there was no
annotation of the real estate mortgage on the titles of the disputed assets;113 hence,
the RTC correctly ruled that these purported mortgages cannot bind the FEBTC.
Second, the RTC found that there were doubts on the authenticity of the deeds of real
estate mortgage involving the disputed fixed assets. The acknowledgment portion of
the deeds indicated that this document and its annexes were signed by the parties.
However, the RTC found that the annexes were not so signed and did not bear any
notarial seal. It was therefore easy to insert an entirely different page as an annex of
the deeds.1âwphi1 Moreover, the integrity of the real estate mortgage was put in
question.
Third, the RTC ruled that the deeds of real estate mortgage were not registered with
the Register of Deeds, making it binding only between the Central Bank and the PBC.
It cannot bind the FEBTC who was not notified of the alleged mortgage. 114
In these lights, we find that the disputed fixed assets were not submitted as collaterals
to the Central Bank and are thus not excluded from the assets purchased by the
FEBTC.
Legal consequences
As discussed, the contract of sale was perfected upon the execution of the MOA.
Hence, the terms and conditions of the contract of sale under the MOA, as confirmed
by the PA, are reciprocally demandable from both parties.
Therefore, the Liquidator and the CB-BOL as the intervenor, must execute the
corresponding deeds of sale in favor of the FEBTC; and the FEBTC must pay the
purchase price of the disputed fixed assets. Specifically, these fixed assets are the
PBC branches located at:
1. Soler (Arranque)
2. Bacolod City
3. Cabanatuan City
4. San Pablo City
5. Cebu-Manalili
6. Davao-Sta. Ana
7. San Fernando, La Union
 8. Legaspi City The RTC is directed to conduct the proceedings in this case with dispatch.

9. Iloilo City-Central Market WHEREFORE, premises considered, we hereby GRANT the FEBTC's petition for
review on certiorari, and REVERSE the May 31, 2006 Decision of the Court of
With respect to the purchase price of these fixed assets, we note that the purchase Appeals in CA-G.R. C.V. No. 56624.
price and manner of payment were provided under Sections 3(c) and 10(b) of the
MOA, to wit: The case is REMANDED to the Regional Trial Court (RTC), Branch 31, Manila, for
purposes of computing the purchase price of the disputed fixed assets in accordance
i. Section 3(c) with the provisions of Sections 3(c) and 10(b) of the MOA.

Section 3 - Valuation of Assets and Liabilities Specifically, these assets are the PBC branches located in: (1) Soler (Arranque); (2)
Bacolod City; (3) Cabanatuan City; (4) San Pablo City; (5) Cebu-Manalili; (6) Davao-
Sta. Ana; (7) San Fernando, La Union; (8) Legaspi City; and (9) Iloilo City-Central
c. It is further understood that the BUYER shall purchase on the Market.
basis of its sound value less any assigned depreciation accruing
thereon from August 1984, up to the valuation date, all the fixed
assets of the SELLER as described in the Asian Appraisal's Report The RTC is directed to proceed with the computation with DISPATCH.
of August 1984, which is herein incorporated by way of reference,
but shall not purchase fixed assets not yet appraised, equipment, SO ORDERED
furniture and other fixtures provided that the BUYER within a period
of ninety (90) days from the date hereof shall have the first option to
buy any of the said assets of the SELLER which shall form part of
the assets bought under this Memorandum Agreement. (emphasis
and underscoring supplied)

ii. Section 10(b)

Section 10 -Additional Consideration

b) Furthermore, the BUYER shall be entitled to a discount

equivalent to five percent (5%) of the value of the fixed assets,
referred to in Section 3 above, per valuation of the Asian Appraisal
of

August, 1984, less their assigned depreciation from the date of the Appraisal's Report
to the date of the execution of the Absolute Purchase Agreement.1âwphi1 (emphasis
and underscoring supplied)

Since the Court does not have sufficient records for the computation of the assigned
depreciation from the date of the Asian Appraisal's Report until the execution of the
Absolute Purchase Agreement, we deem it proper to remand the case to the RTC for
the computation of the purchase price strictly according to the provisions of Sections
3(c) and 10(b) of the MOA.

The FEBTC is ordered to pay the purchase price computed by the RTC, and the
Liquidator is ordered to deliver the deeds of sale covering the disputed properties
upon payment by the FEB TC of the purchase price.
G.R. No. 212375
KABISIG REAL WEALTH DEV., INC. and FERNANDO C. TIO,, Petitioners
vs.
YOUNG BUILDERS CORPORATION, Respondent
DECISION
PERALTA, J.:
This is a Petition for Review which petitioners Kabisig Real Wealth Dev., Inc. and
Fernando C. Tio filed assailing the Court of Appeals (CA) Decision 1 dated June 28,
2013 and Resolution2 dated March 28, 2014 in CAG.R. CV No. 02945, affirming the
Decision of the Regional Trial Court (RTC) of Cebu City, Branch 12, dated July 31,
2008 in Civil Case No. CEB- 27950.
The following are the pertinent antecedents of the case, as shown by the records:
Sometime in April 2001, Kabisig Real Wealth Dev., Inc. (Kabisig), through Ferdinand
Tio (Tio), contracted the services of Young Builders Corporation (Young Builders) to
supply labor, tools, equipment, and materials for the renovation of its building in Cebu
City. Young Builders then finished the work in September 2001 and billed Kabisig for
P4,123,320.95. However, despite numerous demands, Kabisig failed to pay. It
contended that no written contract was ever entered into between the parties and it
was never informed of the estimated cost of the renovation. Thus, Young Builders
filed an action for Collection of Sum of Money against Kabisig.
On July 31, 2008, the RTC of Cebu City rendered a Decision finding for Young
Builders, thus:
WHEREFORE, judgment is hereby rendered ordering the defendants to pay plaintiff
P4,123,320.95 representing the value of services rendered and materials used in the
renovation of the building of defendant Kabisig Real Wealth Dev., Inc. into a
restaurant of defendant Ferdinand Tio, by way of actual damages, plus 12% per
annum from September 11, 2001 until it is fully paid. Costs against defendants.
SO ORDERED.3
Therefore, Kabisig elevated the case to the CA. On June 28, 2013, the appellate court
affirmed the RTC Decision, with modification, viz.:
WHEREFORE, foregoing premises considered, the Decision dated July 31, 2008
rendered by the Regional Trial Court of Cebu City, Branch 12 in Civil Case No. CEB-
27950 is hereby AFFIRMED with MODIFICATION, deleting the award for actual
damages. As modified, the defendants Kabisig Real Wealth Dev., Inc. and Ferdinand
Tio are ordered to jointly pay the plaintiff Young Builders Corporation Two Million
Four Hundred Thousand (₱2,400,000.00) Pesos as TEMPERATE DAMAGES for
the value of services, rendered and materials used in the renovation of defendants-
appellants building. In addition, the total amount adjudged shall earn interest at the
rate of 12% per annum from September 11, 2001, until it is fully paid. Costs against
defendants.
SO ORDERED.4
Subsequently, Young Builders and Kabisig moved for reconsideration, but both were
denied by the CA.5
Hence, Kabisig filed the instant petition.
The sole issue is whether or not Kabisig is liable to Young Builders for the damages
claimed:
Under the Civil Code, a contract is a meeting of minds, with respect to the other, to
give something or to render some service. Article 1318 reads:
Art. 1318. There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract; and
(3) Cause of the obligation which is established.
Accordingly, for a contract to be valid, it must have the following essential elements:
(1) consent of the contracting parties; (2) object certain, which is the subject matter of
the contract; and (3) cause of the obligation which is established. Consent must exist,
otherwise, the contract is nonexistent. Consent is manifested by the meeting of the
offer and the acceptance of the thing and the cause, which are to constitute the
contract. By law, a contract of sale, is perfected at the moment there is a meeting of
the minds upon the thing that is the object of the contract and upon the price. Indeed,
it is a consensual contract which is perfected by mere consent. 6
Through the testimonies of both Young Builders' and Kabisig's witnesses, Tio
commissioned the company of his friend, Nelson Yu, to supply labor, tools,
equipment, and materials for the renovation of Kabisig's building into a restaurant.
While Tio argues that the renovation was actually for the benefit of his partners,
Fernando Congmon, Gold En Burst Foods Co., and Sunburst Fried Chicken, Inc., and
therefore, they should be the ones who must shoulder the cost of the renovation, said
persons were never impleaded in the instant case. Moreover, all the documents
pertaining to the project, such as official receipts of payment for the building permit
application, are under the names of Kabisig and Tio.
Further, Kabisig's claim as to the absence of a written contract between it and Young
Builders simply does not hold water.1avvphi1 It is settled that once perfected, a
contract is generally binding in whatever form, whether written or oral, it may have
been entered into, provided the aforementioned essential requisites for its validity are
present.7 Article 1356 of the Civil Code provides:
Art. 1356. Contracts shall be obligatory in whatever form they may have been entered
into, provided all the essential requisites for their validity are present.
xxxx
There is nothing in the law that requires a written contract for the agreement in
question to be valid and enforceable. Also, the Court notes that neither Kabisig nor
Tio had objected to the renovation work, until it was already time to settle the bill.
Likewise, the appellate court aptly reduced the amount of damages awarded by the
RTC. Under Article 2199 of the Civil Code, actual or compensatory damages are
those awarded in satisfaction of, or in recompense for, loss or injury sustained. They
proceed from a sense of natural justice and are designed to repair the wrong that has
been done, to compensate for the injury inflicted. They either refer to the loss of what
a person already possesses (dano emergente ), or the failure to receive as a benefit
that which would have pertained to him (lucro cesante ), 8 as in this case.
For an injured party to recover actual damages, however, he is required to prove the
actual amount of loss with reasonable degree of certainty premised upon competent
proof and on the best evidence available. The burden of proof is on the party who
would be defeated if no evidence would be presented on either side. He must
establish his case by a preponderance of evidence, which means that the evidence
adduced by one side is superior to that of the other. In other words, damages cannot
be presumed and courts, in making an award, must point out specific facts that could
afford a basis for measuring compensatory damages. A court cannot merely rely on
speculations, conjectures, or guesswork as to the fact and amount of damages as
well as hearsay or uncorroborated testimony whose truth is suspect. A party is
entitled to adequate compensation only for such pecuniary loss actually suffered and
duly proved. Indeed, to recover actual damages, the amount of loss must not only be
capable of proof but must actually be proven with a reasonable degree of certainty,
premised upon competent proof or best evidence obtainable of its actual
amount.9 Here, the evidence reveals that Young Builders failed to submit any
competent proof of the specific amount of actual damages being claimed. The
documents submitted by Young Builders either do not bear the name of Kabisig or
Tio, their conformity, or signature, or do not indicate in any way that the amount
reflected on its face actually refers to the renovation project.
Notwithstanding the absence of sufficient proof, Young Builders still deserves to be
recompensed for actually completing the work. In the absence of competent proof on
the amount of actual damages, the courts allow the party to receive temperate
damages. Temperate or moderate damages, which are more than nominal but less
than compensatory damages, may be recovered when the court finds that some
pecuniary loss has been suffered but its amount cannot, from the nature of the case,
be proved with certainty.10
To determine the compensation due and to avoid unjust enrichment from resulting out
of a fulfilled contract, the principle of quantum meruit may be used. Under this
principle, a contractor is allowed to recover the reasonable value of the services
rendered despite the lack of a written contract. The measure of recovery under the
principle should relate to the reasonable value of the services performed. The
principle prevents undue enrichment based on the equitable postulate that it is unjust
for a person to retain any benefit without paying for it. Being predicated on equity,
said principle should only be applied if no express contract was entered into, and no
specific statutory provision was applicable.11
The principle of quantum meruit justifies the payment of the reasonable value of the
services rendered and should apply in the absence of an express agreement on the
fees. It is notable that the issue revolves around the parties' inability to agree on the
fees that Young Builders should receive. Considering the absence of an agreement,
and in view of the completion of the renovation, the Court has to apply the principle of
quantum meruit in determining how much is due to Young Builders. Under the
established circumstances, the total amount of ₱2,400,000.00 which the CA awarded
is deemed to be a reasonable compensation under the principle of quantum meruit
since the renovation of Kabisig's building had already been completed in 2001. 12
Finally, the rate of interest should be modified. When the obligation is breached, and it
consists in the payment of a sum of money, as in this case, the interest due should be
that which may have been stipulated in writing. In the absence of stipulation, the rate
of interest shall be 12%, later reduced to 6%,13 per annum to be computed from
default, i.e., from judicial or extrajudicial demand, subject to the provisions of Article
116914 of the Civil Code. Here, the records would show that Young Builders made the
demand on September 11, 2001. Also, the rate of legal interest for a judgment
awarding a sum of money shall be 6% per annum from the time such judgment
becomes final and executory until its satisfaction, this interim period being deemed to
be by then an equivalent to a forbearance of credit. 15
WHEREFORE, PREMISES CONSIDERED, the Court DISMISSES the petition for
lack of merit and AFFIRMS the Decision of the Court of Appeals dated June 28, 2013,
and its Resolution dated March 28, 2014, in CA-G.R. CV No. 02945,
with MODIFICATION as to the interest which must be twelve percent (12%) per
annum of the amount awarded from the time of demand on September 11, 2001 to
June 30, 2013, and six percent (6%) per annum from July 1, 2013 until its full
satisfaction. SO ORDERED.
G.R. No. 162333 December 23, 2008
BIENVENIDO C. TEOCO and JUAN C. TEOCO, JR., petitioners,
vs.
METROPOLITAN BANK AND TRUST COMPANY, respondent.
DECISION
REYES, R.T., J.:
REAL creditors are rarely unwilling to receive their debts from any hand which will pay
them.1 Ang tunay na may pautang ay bihirang tumanggi sa kabayaran mula
kaninuman.
This is a petition for review on certiorari seeking the reversal of the Decision2 of the
Court of Appeals (CA) in CA-G.R. CV No. 58891 dated February 20, 2004 which
annulled and set aside the decision of the Regional Trial Court (RTC) of Catbalogan,
Samar on July 22, 1997 in Cadastral Record No. 1378. The RTC originally dismissed
the petition for writ of possession filed by respondent Metropolitan Bank and Trust
Company (Metrobank) on the ground that intervenors and present petitioners, the
brothers Bienvenido Teoco and Juan Teoco, Jr. (the brothers Teoco), have redeemed
the subject property. The CA reversed this dismissal and ordered the issuance of a
writ of possession in favor of respondent Metrobank.
Culled from the records, the facts are as follows:
Lydia T. Co, married to Ramon Co, was the registered owner of two parcels of land
situated in Poblacion, Municipality of Catbalogan, Province of Samar under Transfer
Certificate of Title (TCT) Nos. T-6220 and T-6910.3Ramon Co mortgaged the said
parcels of land to Metrobank for a sum of P200,000.00.
On February 14, 1991, the properties were sold to Metrobank in an extrajudicial
foreclosure sale under Act No. 3135. One year after the registration of the Certificates
of Sale, the titles to the properties were consolidated in the name of Metrobank for
failure of Ramon Co to redeem the same within the one year period provided for by
law. TCT Nos. T-6220 and T-6910 were cancelled and TCT Nos. T-8482 and T-8493
were issued in the name of Metrobank.
On November 29, 1993, Metrobank filed a petition for the issuance of a writ of
possession against Ramon Co and Lydia Co (the spouses Co). However, since the
spouses Co were no longer residing in the Philippines at the time the petition was
filed, the trial court ordered Metrobank, on January 12, 1994 and again on January
26, 1994 to effect summons by publication against the spouses Co.
On May 17, 1994, the brothers Teoco filed an answer-in-intervention alleging that
they are the successors-in-interest of the spouses Co, and that they had duly and
validly redeemed the subject properties within the reglementary period provided by
law. The brothers Teoco thus prayed for the dismissal of Metrobank’s petition for a
writ of possession, and for the nullification of the TCTs issued in the name of
Metrobank. The brothers Teoco further prayed for the issuance in their name of new
certificates of title.
Metrobank, in its reply, alleged that the amount deposited by the brothers Teoco as
redemption price was not sufficient, not being in accordance with Section 78 of the
General Banking Act. Metrobank also said the assignment of the right of redemption
by the spouses Co in favor of the brothers Teoco was not properly executed, as it
lacks the necessary authentication from the Philippine Embassy.
On February 24, 1995, the trial court was informed that the brothers Teoco had
deposited the amount of P356,297.57 to the clerk of court of the RTC in Catbalogan,
Samar. The trial court ordered Metrobank to disclose whether it is allowing the
brothers Teoco to redeem the subject properties. Metrobank refused to accept the
amount deposited by the brothers Teoco, alleging that they are obligated to pay the
spouses Co’s subsequent obligations to Metrobank as well. The brothers Teoco
claimed that they are not bound to pay all the obligations of the spouses Co, but only
the value of the property sold during the public auction.
On February 26, 1997, the trial court reiterated its earlier order directing Metrobank to
effect summons by publication to the spouses Co. Metrobank complied with said
order by submitting documents showing that it caused the publication of summons
against the spouses Co. The brothers Teoco challenged this summons by publication,
arguing that the newspaper where the summons by publication was published,
the Samar Reporter, was not a newspaper of general circulation in the Philippines.
The brothers Teoco furthermore argued that Metrobank did not present witnesses to
identify the documents to prove summons by publication.
RTC Disposition
On July 22, 1997, the RTC rendered its decision in favor of the brothers Teoco, to wit:
WHEREFORE, judgment is hereby rendered dismissing the petition for a writ
of possession under Section 7 of Act 3135 it appearing that intervenor Atty.
Juan C. Teoco, Jr. and his brother Atty. Bienvenido C. Teoco have legally
and effectively redeemed Lot 61 and 67 of Psd-66654, Catbalogan,
Cadastre, from the petitioner Metropolitan Bank and Trust Company.
Accordingly, Metrobank may now withdraw the aforesaid redemption money
of P356,297.57 deposited by Juan C. Teoco, Jr., on February 10, 1992 with
the clerk of court and it is ordered that the Transfer Certificate of Title Nos.
T-8492 and T-8493 of Metropolitan Bank and Trust Company be and are
cancelled and in their place new transfer certificates of title be issued in favor
of Intervenors Attys. Bienvenido C. Teoco and Juan C. Teoco, Jr., of legal
age, married, and residents of Calbiga, Samar, Philippines, upon payment of
the prescribed fees therefore. No pronouncement as to costs. 4
According to the RTC, the case filed by Metrobank should be dismissed since
intervenor Juan C. Teoco, Jr., by his tender of P356,297.57 to Metrobank on February
10, 1992, within the reglementary period of redemption of the foreclosed property,
had legally and effectively redeemed the subject properties from Metrobank. This
redemption amount is a fair and reasonable price and is in keeping with the letter and
spirit of Section 78 of the General Banking Act because Metrobank purchased the
mortgaged properties from the sheriff of the same court for only P316,916.29. In
debunking the argument that the amount tendered was insufficient, the RTC held:
It is contended for Metrobank that the redemption money deposited by Juan
C. Teoco, Jr., is insufficient and ineffective because the spouses Ramon Co
and Lydia T. Co owe it the total amount of P6,856,125 excluding interest and
other charges and the mortgage contract executed by them in favor of
Metrobank in 1985 and 1986 (Exh. A and B) are not only security for
payment of their obligation in the amount of P200,000 but also for those
obligations that may have been previously and later extended to the Co
couple including interest and other charges as appears in the accounts,
books and records of the bank.
Metrobank cites the case of Mojica v. Court of Appeals, 201 SCRA 517
(1991) where the Supreme Court held that mortgages given to secure future
advancements are valid and legal contracts; that the amounts named as
consideration in said contract do not limit the amount for which the mortgage
may stand as security; that a mortgage given to secure the advancements is
a continuing security and is not discharged by repayment of the amount
named in the mortgage until the full amount of the advancements are paid.
In the opinion of this court, it is not fair and just to apply this rule to the case
at bar. There is no evidence offered by Metrobank that these other
obligations of Ramon Co and his wife were not secured by real estate
mortgages of other lands. If the other indebtedness of the Co couple to
Metrobank are secured by a mortgage on their other lands or properties the
obligation can be enforced by foreclosure which the court assumes
Metrobank has already done. There is no proof that Metrobank asked for a
deficiency judgment for these unpaid loans.
The Supreme Court in the Mojica case was dealing with the rights of the
mortgagee under a mortgage from an owner of the land. It determined the
security covered by the mortgage the intention of the parties and the equities
of the case. What was held in that case was hedged about so as to limit the
decision to the particular facts. It must be apparent that the Mojica ruling
cannot be construed to give countenance or approval to the theory that in all
cases without exception mortgages given to secure past and future
advancements are valid and legal contracts.
In construing a contract between the bank and a borrower such a
construction as would be more favorable to the borrower should be adopted
since the alleged past and future indebtedness of Ramon Co to the bank
was not described and specified therein and that the addendum was made
because the mortgage given therefore were not sufficient or that these past
and future advancements were unsecured. That being the case the
mortgage contracts, Exh. A and B should be interpreted against Metrobank
which drew said contracts. A written contract should, in case of doubt, be
interpreted against the party who has drawn the contract (6 R.C.L. 854; H.E.
Heackock Co. vs. Macondray & Co., 42 Phil. 205). Here, the mortgage
contracts are in printed form prepared by Metrobank and therefore
ambiguities therein should be construed against the party causing it (Yatco
vs. El Hogar Filipino, 67 Phil. 610; Hodges vs. Tazaro, CA, 57 O.G. 6970).5
The RTC added that there is another reason for dismissing Metrobank’s petition: the
RTC failed to acquire jurisdiction over the spouses Co. The RTC noted that
Metrobank published its petition for writ of possession, but did not publish the writ of
summons issued by said court on February 16, 1994. According to the RTC:
A petition for a writ of possession of foreclosed property is in reality a
possession suit. That Metrobank prayed for a writ of possession in an
independent special proceeding does not alter the nature of the case as a
possessory suit (Cabrera v. Sinoy, L.-12648, 23 November 1959).
The defendant or owner of the property foreclosed by the petitioner should
be summoned to answer the petition. Accordingly, the publication made by
the petitioner is fatally flawed and defective and on that basis alone this court
acquired no jurisdiction over the person of respondents Ramon Co and his
wife (Mapa vs. Court of Appeals, G.R. No. 79394, October 2, 1992; Lopez
vs. Philippine National Bank, L-34223, December 10, 1982).6
Metrobank appealed to the CA. In its appeal, Metrobank claimed that the RTC erred
in finding that the publication made by it is fatally flawed, and that the brothers Teoco
had effectively redeemed the properties in question.
CA Disposition
On February 20, 2004, the CA decided the appeal in favor of Metrobank, with the
following disposition:
WHEREFORE, the appeal is hereby GRANTED. The assailed Decision
dated July 22, 1997 rendered by the Regional Trial Court of Catbalogan,
Samar Branch 29 in Cadastral Record No. 1378 is hereby ANNULLED and
SET ASIDE. Accordingly, let a writ of possession in favor of petitioner-
appellant METROPOLITAN BANK AND TRUST COMPANY be issued over
the properties and improvements covered by Transfer Certificates of Title
Nos. T-8492 and T-8493 of the Registry of Deeds of Western Samar.
SO ORDERED.7
As regards the question of jurisdiction, the CA ruled that since the parcels of land in
question were already registered in the name of Metrobank at the time the petition
was filed, and since the certificates of title of the spouses Co were already cancelled,
there is no more need to issue summons to the spouses Co. The CA noted that the
best proof of ownership of the parcel of land is a certificate of title. 8
The CA also held that the issue of the validity of summons to the spouses Co is
unimportant considering that the properties in question were mortgaged to Metrobank
and were subsequently sold to the same bank after the spouses Co failed to satisfy
the principal obligation. Hence, the applicable law is Act No. 3135, 9 as amended by
Act No. 4118. Section 7 of said Act No. 3135 states that a petition for the issuance of
a writ of possession filed by the purchaser of a property in an extrajudicial foreclosure
sale may be done ex parte. It is the ministerial duty of the trial court to grant such writ
of possession. No discretion is left to the trial court. Any question regarding the
cancellation of the writ, or with respect to the validity and regularity of the public sale
should be determined in a subsequent proceeding as outlined in Section 9 of Act No.
3135.10
Further, the CA held that the brothers Teoco were not able to effectively redeem the
subject properties, because the amount tendered was insufficient, and the brothers
Teoco have not sufficiently shown that the spouses Co’s right of redemption was
properly transferred to them.
Issues
In this Rule 45 petition, the brothers Teoco impute to the CA the following errors:
I does not necessarily put within its coverage all loan agreements that may be
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR
OF JUDGMENT IN HOLDING THAT PETITIONERS FAILED TO REDEEM
THE SUBJECT PROPERTIES WITHIN THE REGLEMENTARY PERIOD OF
ONE YEAR AND THAT THE REDEMPTION PRICE TENDERED IS
INSUFFICIENT.
II
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR
OF JUDGMENT IN HOLDING PETITIONERS TO PAY NOT ONLY
THE P200,000 PRINCIPAL OBLIGATION BUT ALSO THAT PREVIOUSLY
EXTENDED, WHETHER DIRECT OR INDIRECT, PRINCIPAL OR
SECONDARY AS APPEARS IN THE ACCOUNTS, BOOKS AND
RECORDS.
III
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE
PETITIONERS HAVE NOT SUFFICIENTLY SHOW(N) THAT THE RIGHT
OF REDEMPTION WAS PROPERLY TRANSFERRED TO THEM.
IV
THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE
DECISION OF THE REGIONAL TRIAL COURT, BRANCH 29, AND
GRANTING THE WRIT OF POSSESSION TO THE
RESPONDENT.11(Underscoring supplied)
Our Ruling
Sufficiency of Amount Tendered
We find that neither petitioners, the brothers Teoco, nor respondent, Metrobank, were
able to present sufficient evidence to prove whether the additional loans granted to
the spouses Co by Metrobank were covered by the mortgage agreement between
them. The brothers Teoco failed to present any evidence of the supposed trust receipt
agreement between Metrobank and the spouses Co, or an evidence of the supposed
payment by the spouses Co of the other loans extended by Metrobank. Metrobank,
on the other hand, merely relied on the stipulation on the mortgage deed that the
mortgage was intended to secure "the payment of the same (P200,000.00 loan)
and those that may hereafter be obtained."12 However, there was no mention
whatsoever of the mortgage agreement in the succeeding loans entered into by the
spouses Co.
While we agree with Metrobank that mortgages intended to secure future
advancements are valid and legal contracts,13 entering into such mortgage contracts
subsequently entered into by the parties. If Metrobank wishes to apply the mortgage
contract in order to satisfy loan obligations not stated on the face of such contract,
Metrobank should prove by a preponderance of evidence that such subsequent
obligations are secured by said mortgage contract and not by any other form of
security.
In order to prevent any injustice to, or unjust enrichment of, any of the parties, this
Court holds that the fairest resolution is to allow the brothers Teoco to redeem the
foreclosed properties based on the amount for which it was foreclosed (P255,441.14
plus interest). This is subject, however, to the right of Metrobank to foreclose the
same property anew in order to satisfy the succeeding loans entered into by the
spouses Co, if they were, indeed, covered by the mortgage contract. The right of
Metrobank to foreclose the mortgage would not be hampered by the transfer of the
properties to the brothers Teoco as a result of this decision, since Article 2127 of the
Civil Code provides:
Art. 2127. The mortgage extends to the natural accessions, to the
improvements, growing fruits, and the rents or income not yet received when
the obligation becomes due, and to the amount of the indemnity granted or
owing to the proprietor from the insurers of the property mortgaged, or in
virtue of expropriation for public use, with the declarations, amplifications
and limitations established by law, whether the estate remains in the
possession of the mortgagor, or it passes into the hands of a third person.
(Emphasis supplied)
Further, Article 2129 of the Civil Code provides:
 Art. 2129. The creditor may claim from a third person in possession of the
mortgaged property, the payment of the part of the credit secured by the
property which said third person possesses, in the terms and with the
formalities which the law establishes.
The mortgage directly and immediately subjects the property upon which it is
imposed, whoever the possessor may be to the fulfillment of the obligation for whose
security it was constituted. Otherwise stated, a mortgage creates a real right which is
enforceable against the whole world. Hence, even if the mortgage property is sold or
its possession transferred to another, the property remains subject to the fulfillment of
the obligation for whose security it was constituted.14
Thus, the redemption by the brothers Teoco shall be without prejudice to the
subsequent foreclosure of same properties by Metrobank in order to satisfy other
obligations covered by the Real Estate Mortgage.
Transfer of Right of Redemption
The CA held that the brothers Teoco have not sufficiently shown that the spouses
Co’s right of redemption was properly transferred to them. The assignment of the right
of redemption only stated that the spouses Co are transferring the right of redemption
to their parents, brothers, and sisters, but did not specifically include the brothers
Teoco, who are just brothers-in-law of Ramon Co. Furthermore, the spouses Co no
longer reside in the Philippines, and the assignment of the right of redemption was not
properly executed and/or authenticated.
The alleged transfer of the right of redemption is couched in the following language:
KNOW ALL MEN BY THESE PRESENTS:
That we, RAMON CO and LYDIA CO, of legal ages, for and in
consideration of preserving the continuous ownership and
possession of family owned properties, by these presents, hereby
cede, transfer and convey in favor of my parents, brothers and
sisters, the right to redeem the properties under TCT Nos. T-6910
and T-6220, located in Patag district, Catbalogan, Samar, sold by
public auction sale on February 14, 1991 to the Metropolitan Bank
and Trust Company.
Furthermore, we waived whatever rights we may have over the
properties in favor of the successor-in-interest including that of
transferring the title to whoever may redeem the aforesaid
properties.
IN WITNESS WHEREOF, we have hereunto affixed our signatures this
10th day of January, 1992 at Vancouver, Canada.15
The brothers Teoco may be brothers-in-law only of Ramon Co, but they are also the
brothers of Lydia Teoco Co, who is actually the registered owner of the properties
covered by TCT Nos. T-6910 and T-6220. Clearly, the brothers Teoco are two of the
persons referred to in the above transfer of the right of redemption executed by the
spouses Co.
Anent the CA observation that the assignment of the right of redemption was not
properly executed and/or authenticated, Lopez v. Court of Appeals16 is instructive.
In Lopez, this Court ruled that a special power of attorney executed in a foreign
country is generally not admissible in evidence as a public document in our courts.
The Court there held:
Is the special power of attorney relied upon by Mrs. Ty a public document?
We find that it is. It has been notarized by a notary public or by a competent
public official with all the solemnities required by law of a public document.
When executed and acknowledged in the Philippines, such a public
document or a certified true copy thereof is admissible in evidence. Its due
execution and authentication need not be proven unlike a private writing.
Section 25, Rule 132 of the Rules of Court provides –
Sec. 25. Proof of public or official record. – An official record or an
entry therein, when admissible for any purpose, may be evidenced
by an official publication thereof or by a copy attested by the officer
having the legal custody of the record, or by his deputy, and
accompanied, if the record is not kept in the Philippines, with a
certificate that such officer has the custody. If the office in which the
record is kept is in a foreign country, the certificate may be made by
a secretary of embassy or legation consul general, consul, vice
consul, or consular agent or by any officer in the foreign service of
the Philippines stationed in the foreign country in which the record
is kept, and authenticated by the seal of his office.
From the foregoing provision, when the special power of attorney is
executed and acknowledged before a notary public or other competent
official in a foreign country, it cannot be admitted in evidence unless it is
certified as such in accordance with the foregoing provision of the rules by a
secretary of embassy or legation, consul general, consul, vice consul, or
consular agent or by any officer in the foreign service of the Philippines
stationed in the foreign country in which the record is kept of said public
document and authenticated by the seal of his office. A city judge-notary who
notarized the document, as in this case, cannot issue such certification.17
Verily, the assignment of right of redemption is not admissible in evidence as a public
document in our courts. However, this does not necessarily mean that such document
has no probative value.
There are generally three reasons for the necessity of the presentation of public
documents. First, public documents are prima facie evidence of the facts stated in
them, as provided for in Section 23, Rule 132 of the Rules of Court:
SEC. 23. Public documents as evidence. – Documents consisting of entries
in public records made in the performance of a duty by a public officer
are prima facie evidence of the facts therein stated. All other public
documents are evidence, even against a third person, of the fact which gave
rise to their execution and of the date of the latter. (Underscoring supplied)
Second, the presentation of a public document dispenses with the need to prove a
document’s due execution and authenticity, which is required under Section 20, Rule
132 of the Rules of Court for the admissibility of private documents offered as
authentic:
SEC. 20. Proof of private document. – Before any private document offered
as authentic is received in evidence, its due execution and authenticity must
be proved either:
(a) By anyone who saw the document executed or written; or
(b) By evidence of the genuineness of the signature or handwriting
of the maker.
Any other private document need only be identified as that which it is
claimed to be. (Underscoring supplied)
In the presentation of public documents as evidence, on the other hand, due
execution and authenticity are already presumed:
SEC. 23. Public documents are evidence. – Documents consisting of entries
in public records made in the performance of a duty by a public officer are
prima facie evidence of the facts therein stated. All other public documents
are evidence, even against a third person, of the fact which gave rise to their
execution and of the date of the latter. (Underscoring supplied)
SEC. 30. Proof of notarial documents. – Every instrument duly
acknowledged or proved and certified as provided by law, may be presented
in evidence without further proof, the certificate of acknowledgment being
prima facie evidence of the execution of the instrument or document
involved. (Underscoring supplied)
Third, the law may require that certain transactions appear in public instruments, such
as Articles 1358 and 1625 of the Civil Code, which respectively provide:
Art. 1358. The following must appear in a public document:
(1) Acts and contracts which have for their object the creation, transmission,
modification or extinguishment of real rights over immovable property; sales
of real property or of an interest therein governed by Articles 1403, No. 2,
and 1405;
(2) The cession, repudiation or renunciation of hereditary rights or of those of
the conjugal partnership of gains;
(3) The power to administer property, or any other power which has for its
object an act appearing or which should appear in a public document, or
should prejudice a third person;
(4) The cession of actions or rights proceeding from an act appearing in a
public document.
All other contracts where the amount involved exceeds five hundred pesos
must appear in writing, even a private one. But sales of goods, chattels or
things in action are governed by Articles 1403, No. 2, and 1405.
Art. 1625. An assignment of a credit, right or action shall produce no effect
as against third person, unless it appears in a public instrument, or the
instrument is recorded in the Registry of Property in case the assignment
involves real property. (Underscoring supplied)
Would the exercise by the brothers Teoco of the right to redeem the properties in
question be precluded by the fact that the assignment of right of redemption was not
contained in a public document? We rule in the negative.
Metrobank never challenged either the content, the due execution, or the
genuineness of the assignment of the right of redemption. Consequently, Metrobank
is deemed to have admitted the same. Having impliedly admitted the content of the
assignment of the right of redemption, there is no necessity for a prima facie evidence
of the facts there stated. In the same manner, since Metrobank has impliedly admitted
the due execution and genuineness of the assignment of the right of redemption, a
private document evidencing the same is admissible in evidence. 18
True it is that the Civil Code requires certain transactions to appear in public
documents. However, the necessity of a public document for contracts which transmit
or extinguish real rights over immovable property, as mandated by Article 1358 of the
Civil Code, is only for convenience; it is not essential for validity or
enforceability.19 Thus, in Cenido v. Apacionado,20 this Court ruled that the only effect
of noncompliance with the provisions of Article 1358 of the Civil Code is that a party to
such a contract embodied in a private document may be compelled to execute a
public document:
Article 1358 does not require the accomplishment of the acts or contracts in
a public instrument in order to validate the act or contract but only to insure
its efficacy, so that after the existence of said contract has been admitted,
 the party bound may be compelled to execute the proper document. This is
clear from Article 1357, viz.:
"Art. 1357. If the law requires a document or other special form, as
in the acts and contracts enumerated in the following article (Article
1358), the contracting parties may compel each other to observe
that form, once the contract has been perfected. This right may be
exercised simultaneously with the action upon the contract." 21
On the other hand, Article 1625 of the Civil Code provides that "[a]n assignment of a
credit, right or action shall produce no effect as against third person, unless it
appears in a public instrument, or the instrument is recorded in the Registry of
Property in case the assignment involves real property."
In Co v. Philippine National Bank,22 the Court interpreted the phrase "effect as against
a third person" to be damage or prejudice to such third person, thus:
x x x In Lichauco vs. Olegario, et al., 43 Phil. 540, this Court held that
"whether or not x x x an execution debtor was legally authorized to sell his
right of redemption, is a question already decided by this Court in the
affirmative in numerous decisions on the precepts of Sections 463 and 464
and other sections related thereto, of the Code of Civil Procedure." (The
mentioned provisions are carried over in Rule 39 of the Revised Rules of
Court.) That the transfers or conveyances in question were not registered is
of miniscule significance, there being no showing that PNB was damaged or
could be damaged by such omission. When CITADEL made its tender on
May 5, 1976, PNB did not question the personality of CITADEL at all. It is
now too late and purely technical to raise such innocuous failure to comply
with Article 1625 of the Civil Code.23
Except for the question of the claimed lack of authority on the part of TFC’s
president to execute the assignment of credit in favor of PCIB improperly
raised for the first time on appeal, as observed by the Court of Appeals – the
issues raised by Ansaldo were set up by him in, and after analysis and
assessment rejected by, both the Trial Court and the Appellate Tribunal. This
court sees no error whatever in the appreciation of the facts by either Court
or their application of the relevant law and jurisprudence to those facts,
inclusive of the question posed anew by Ansaldo relative to the alleged
absence of authority on the part of TFC’s president to assign the
corporation’s credit to PCIB.25
In the case at bar, Metrobank would not be prejudiced by the assignment by the
spouses Co of their right of redemption in favor of the brothers Teoco. As conceded
by Metrobank, the assignees, the brothers Teoco, would merely step into the shoes of
the assignors, the spouses Co. The brothers Teoco would have to comply with all the
requirements imposed by law on the spouses Co. Metrobank would not lose any
security for the satisfaction of any loan obtained from it by the spouses Co. In fact, the
assignment would even prove to be beneficial to Metrobank, as it can foreclose on the
subject properties anew, provided it proves that the subsequent loans entered into by
the spouses Co are covered by the mortgage contract.
WHEREFORE, the decision of the Court of Appeals is SET ASIDE. The decision of
the Regional Trial Court in Catbalogan, Samar is REINSTATED with the
following MODIFICATION: the redemption by Bienvenido C. Teoco and Juan C.
Teoco, Jr. of the properties covered by TCT Nos. T-6910 and T-6220 shall be without
prejudice to the subsequent foreclosure of same properties by Metropolitan Bank and
Trust Company to satisfy other loans covered by the Real Estate Mortgage.
SO ORDERED.

In Ansaldo v. Court of Appeals,24 the Court held:

In its Decision, the First Division of the Appellate Tribunal, speaking through
the Presiding Justice at the time, Hon. Magno S. Gatmaitan, held as regards
Arnaldo’s contentions, that –

xxxx

2) there was no need that the assignment be in a public document

this being required only "to produce x x x effect as against third
persons" (Article 1625, Civil Code), i.e., "to adversely affect 3rd
persons," i.e., "a 3rd person with a right against original creditor, for
example, an original creditor of creditor, – against whom surely
such an assignment by his debtor (creditor in the credit assigned)
would be prejudicial, because he, creditor of assigning creditor,
would thus be deprived of an attachable asset of his debtor x x x;

xxxx